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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period endedMarch 31, 2024
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
001-13783
IES_holding_logo (simple).jpg
IES Holdings, Inc.
(Exact name of registrant as specified in its charter)



Delaware76-0542208
(State or other jurisdiction of(I.R.S. Employer
incorporation or organization)Identification No.)
2 Riverway, Suite 1730, Houston, Texas 77056
(Address of principal executive offices and zip code)
Registrant’s telephone number, including area code: (713860-1500
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol     Name of each exchange on which registered
Common Stock, par value $0.01 per share
IESC
NASDAQ Global Market

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 filerAccelerated filer
Non-accelerated filerSmaller 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 April 30, 2024, there were 20,243,458 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, the impact of third party vaccine mandates on employee recruiting and retention, 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)
March 31,September 30,
20242023
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$105,969 $75,770 
Accounts receivable:
Trade, net of allowance of $1,887 and $1,649, respectively
416,657 363,836 
Retainage86,992 76,934 
Inventories104,612 95,655 
Costs and estimated earnings in excess of billings48,284 48,620 
Prepaid expenses and other current assets33,984 10,481 
Total current assets796,498 671,296 
Property and equipment, net67,820 63,410 
Goodwill92,395 92,395 
Intangible assets, net50,075 56,208 
Deferred tax assets21,276 20,383 
Operating right of use assets57,564 61,761 
Other non-current assets15,536 16,147 
Total assets$1,101,164 $981,600 
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses306,463 296,797 
Billings in excess of costs and estimated earnings127,767 103,771 
Total current liabilities434,230 400,568 
Long-term debt  
Operating long-term lease liabilities38,175 42,098 
Other tax liabilities22,799 22,047 
Other non-current liabilities10,996 16,951 
Total liabilities506,200 481,664 
Noncontrolling interest60,158 49,951 
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 20,243,458 and 20,194,218 outstanding, respectively
220 220 
Treasury stock, at cost, 1,806,071 and 1,855,311 shares, respectively
(50,428)(49,450)
Additional paid-in capital204,088 203,431 
Retained earnings380,926 295,784 
Total stockholders’ equity534,806 449,985 
Total liabilities and stockholders’ equity$1,101,164 $981,600 

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 March 31,
20242023
Revenues$705,733 $568,881 
Cost of services534,120 467,955 
Gross profit171,613 100,926 
Selling, general and administrative expenses95,272 69,349 
Contingent consideration 69 
Gain on sale of assets(1,373)(102)
Operating income77,714 31,610 
Interest and other (income) expense:
Interest expense406 1,049 
Other (income) expense, net1,136 (1,768)
Income from operations before income taxes76,172 32,329 
Provision for income taxes19,372 8,157 
Net income56,800 24,172 
Net income attributable to noncontrolling interest(3,891)(2,621)
Comprehensive income attributable to IES Holdings, Inc.$52,909 $21,551 
Earnings per share attributable to common stockholders of IES Holdings, Inc.:
Basic$2.32$0.93
Diluted$2.29$0.92
Shares used in the computation of earnings per share:
Basic20,227,34220,170,824
Diluted20,479,75520,387,796

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)

Six Months Ended March 31,
20242023
Revenues$1,340,177 $1,143,755 
Cost of services1,024,760 947,391 
Gross profit315,417 196,364 
Selling, general and administrative expenses181,122 137,117 
Contingent consideration35 138 
Gain on sale of assets(1,444)(13,162)
Operating income135,704 72,271 
Interest and other (income) expense:
Interest expense803 2,233 
Other income, net(257)(1,073)
Income from operations before income taxes135,158 71,111 
Provision for income taxes34,770 18,185 
Net income100,388 52,926 
Net income attributable to noncontrolling interest(6,523)(4,973)
Comprehensive income attributable to IES Holdings, Inc.$93,865 $47,953 
Earnings per share attributable to common stockholders of IES Holdings, Inc.:
Basic$4.21$2.08
Diluted$4.16$2.06
Shares used in the computation of earnings per share:
Basic20,213,42120,206,814
Diluted20,449,69120,414,492

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 March 31, 2024
Common StockTreasury StockAdditional Paid-In CapitalRetained EarningsTotal Stockholders' Equity
SharesAmountSharesAmount
BALANCE, December 31, 202322,049,529 $220 (1,835,553)$(49,521)$203,986 $333,958 $488,643 
Issuances under compensation plans— — 50,000 1,355 (1,355)—  
Acquisition of treasury stock— — (21,518)(2,289) — (2,289)
Option exercised— — 1,000 27 (19)— 8 
Non-cash compensation— — — — 1,476 — 1,476 
Increase in noncontrolling interest— — — — — (5,941)(5,941)
Net income attributable to IES Holdings, Inc.— — — — — 52,909 52,909 
BALANCE, March 31, 202422,049,529 $220 (1,806,071)$(50,428)$204,088 $380,926 $534,806 

Three Months Ended March 31, 2023
Common StockTreasury StockAdditional Paid -In CapitalRetained EarningsTotal Stockholders' Equity
SharesAmountSharesAmount
BALANCE, December 31, 202222,049,529 $220 (1,875,676)$(49,653)$200,940 $226,544 $378,051 
Acquisition of treasury stock— — (4,332)(151)3 — (148)
Options exercised— — 2,000 53 (39)— 14 
Non-cash compensation— — — — 1,054 — 1,054 
Increase in noncontrolling interest— — — — — (2,771)(2,771)
Net income attributable to IES Holdings, Inc.— — — — — 21,551 21,551 
BALANCE, March 31, 202322,049,529 $220 (1,878,008)$(49,751)$201,958 $245,324 $397,751 

Six Months Ended March 31, 2024
Common StockTreasury StockAdditional Paid -In CapitalRetained EarningsTotal Stockholders' Equity
SharesAmountSharesAmount
BALANCE, September 30, 202322,049,529 $220 (1,855,311)$(49,450)$203,431 $295,784 $449,985 
Issuances under compensation plans— — 82,180 2,213 (2,213)—  
Acquisition of treasury stock— — (33,940)(3,218) — (3,218)
Options exercised— — 1,000 27 (19)— 8 
Non-cash compensation— — — — 2,889 — 2,889 
Increase in noncontrolling interest— — — — — (8,723)(8,723)
Net income attributable to IES Holdings, Inc.— — — — — 93,865 93,865 
BALANCE, March 31, 202422,049,529 $220 (1,806,071)$(50,428)$204,088 $380,926 $534,806 

Six Months Ended March 31, 2023
Common StockTreasury StockAdditional Paid -In CapitalRetained EarningsTotal Stockholders' Equity
SharesAmountSharesAmount
BALANCE, September 30, 202222,049,529 $220 (1,707,629)$(44,000)$201,871 $203,197 $361,288 
Issuances under compensation plans— — 71,013 1,843 (1,843)—  
Acquisition of treasury stock— — (243,392)(7,647)10 — (7,637)
Options exercised— — 2,000 53 (39)— 14 
Non-cash compensation— — — — 1,959 — 1,959 
Increase in noncontrolling interest— — — — — (5,826)(5,826)
Net income attributable to IES Holdings, Inc.— — — — — 47,953 47,953 
BALANCE, March 31, 202322,049,529 $220 (1,878,008)$(49,751)$201,958 $245,324 $397,751 

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)
Six Months Ended March 31,
20242023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income$100,388 $52,926 
Adjustments to reconcile net income to net cash provided by operating activities:
Bad debt expense503 330 
Deferred financing cost amortization140 132 
Depreciation and amortization15,438 13,252 
Gain on sale of assets(1,444)(13,162)
Non-cash compensation expense2,925 1,956 
Deferred income tax expense1,932 6,955 
Unrealized loss on trading securities1,790  
Changes in operating assets and liabilities:
Accounts receivable(53,324)35,660 
Inventories(8,957)(11,798)
Costs and estimated earnings in excess of billings336 4,120 
Prepaid expenses and other current assets(35,252)(11,672)
Other non-current assets290 1,728 
Accounts payable and accrued expenses9,462 (30,454)
Billings in excess of costs and estimated earnings23,996 10,109 
Other non-current liabilities470 (23)
Net cash provided by operating activities58,693 60,059 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment(13,359)(6,677)
Proceeds from sale of assets2,375 19,124 
Cash paid in conjunction with equity investments(380)(165)
Net cash provided by (used in) investing activities(11,364)12,282 
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of debt1,346,388 1,162,971 
Repayments of debt(1,346,388)(1,230,519)
Cash paid for finance leases(1,981)(1,617)
Settlement of contingent consideration liability(4,074) 
Distribution to noncontrolling interest(7,865)(5,272)
Purchase of treasury stock(3,218)(7,637)
Options exercised8 14 
Net cash used in financing activities(17,130)(82,060)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS30,199 (9,719)
CASH AND CASH EQUIVALENTS, beginning of period75,770 24,848 
CASH AND CASH EQUIVALENTS, end of period$105,969 $15,129 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest$269 $1,765 
Cash paid for income taxes, net
$37,449 $4,660 

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. If all of the noncontrolling interests remaining outstanding at March 31, 2024 had been redeemable at that date, the aggregate redemption amount would have been $60,158.

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 will impact how we account for future business combinations.

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. 29 to the Schedule 13D filed by Tontine with the SEC on March 15, 2024 and the Company's shares outstanding as of April 30, 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 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. In December 2022, the Company entered into an amendment of the sublease agreement, which was set to terminate on February 28, 2023, to extend the term of the agreement through August 31, 2024 and to increase the monthly payments from approximately $8 to approximately $9 effective March 1, 2023. 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
12


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.
 
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 and performance obligation. We estimate variable consideration for a performance obligation 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
13


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 six months ended March 31, 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 March 31,Six Months Ended March 31,
2024202320242023
Communications$193,503 $141,120 $364,251 $288,365 
Residential
Single-family252,292 227,216 498,859 470,925 
Multi-family and Other87,080 78,896 156,369 153,265 
Total Residential339,372 306,112 655,228 624,190 
Infrastructure Solutions
Industrial Services12,076 11,562 23,17422,516 
Custom Power Solutions63,713 41,054 115,50379,384 
Total Infrastructure Solutions75,789 52,616 138,677101,900 
Commercial & Industrial97,069 69,033 $182,021129,300 
Total Revenue$705,733 $568,881 $1,340,177$1,143,755 

Three Months Ended March 31, 2024
CommunicationsResidentialInfrastructure SolutionsCommercial & IndustrialTotal
Fixed-price$141,144 $339,372 $73,543 $82,972 $637,031 
Time-and-material52,359  2,246 14,097 68,702 
Total revenue$193,503 $339,372 $75,789 $97,069 $705,733 
Three Months Ended March 31, 2023
CommunicationsResidentialInfrastructure SolutionsCommercial & IndustrialTotal
Fixed-price$92,392 $306,112 $50,951 $59,915 $509,370 
Time-and-material48,728  1,665 9,118 59,511 
Total revenue$141,120 $306,112 $52,616 $69,033 $568,881 
Six Months Ended March 31, 2024
CommunicationsResidentialInfrastructure SolutionsCommercial & IndustrialTotal
Fixed-price$266,367 $655,228 $134,423 $156,882 $1,212,900 
Time-and-material97,884  4,254 25,139 127,277 
Total revenue$364,251 $655,228 $138,677 $182,021 $1,340,177 
Six Months Ended March 31, 2023
CommunicationsResidentialInfrastructure SolutionsCommercial & IndustrialTotal
Fixed-price$179,666 $624,190 $98,497 $111,810 $1,014,163 
Time-and-material108,699  3,403 17,490 129,592 
Total revenue$288,365 $624,190 $101,900 $129,300 $1,143,755 
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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 March 31, 2024, Accounts receivable included $7,385 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 six months ended March 31, 2024 and 2023, we recognized revenue of $92,970 and $52,350 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 March 31, 2024, we had remaining performance obligations of $1,065,444. The Company expects to recognize revenue on approximately $875,040 of the remaining performance obligations over the next 12 months, with the remainder recognized thereafter.
 
For the three and six months ended March 31, 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 March 31, 2024, the Company was in compliance with the financial covenants under the Amended Credit Agreement.

At March 31, 2024 and September 30, 2023, we had no outstanding borrowings under our revolving credit facility. At March 31, 2024, we had $5,606 in outstanding letters of credit and total availability of $143,501 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 six months ended March 31, 2024 and 2023:
Three Months Ended March 31,
20242023
Numerator:
Net income attributable to IES Holdings, Inc.$52,909 $21,551 
Increase in noncontrolling interest(5,941)(2,771)
Net income attributable to common stockholders of IES Holdings, Inc.$46,968 $18,780 
Denominator:
Weighted average common shares outstanding — basic20,227,342 20,170,824 
Effect of dilutive stock options and non-vested securities252,413 216,972 
Weighted average common and common equivalent shares outstanding — diluted
20,479,755 20,387,796 
Earnings per share attributable to common stockholders of IES Holdings, Inc.:
Basic$2.32 $0.93 
Diluted$2.29 $0.92 
Six Months Ended March 31,
20242023
Numerator:
Net income attributable to IES Holdings, Inc.$93,865 $47,953 
Increase in noncontrolling interest(8,723)(5,826)
Net income attributable to restricted stockholders of IES Holdings, Inc. (10)
Net income attributable to common stockholders of IES Holdings, Inc.$85,142 $42,117 
Denominator:
Weighted average common shares outstanding — basic20,213,421 20,206,814 
Effect of dilutive stock options and non-vested securities236,270 207,678 
Weighted average common and common equivalent shares outstanding — diluted
20,449,691 20,414,492 
Earnings per share attributable to IES Holdings, Inc.:
Basic$4.21$2.08
Diluted$4.16$2.06
For the three and six months ended March 31, 2024 and 2023, the average price of our common shares exceeded the exercise price of all of our outstanding stock options. As a result, all of our outstanding stock options were included in the computation of diluted earnings per share. For the six months ended March 31, 2024 and 2023, the computation of diluted earnings per share excluded 21,584 and 22,344 unvested Employee PSUs (as defined below), respectively, as the inclusion of such instruments would have been anti-dilutive. All unvested Employee PSUs were included in the computation of diluted earnings per share for the three months ended March 31, 2024 and 2023.

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 Company’s Chief Operating Decision Maker (“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 six months ended March 31, 2024 and 2023 is as follows:
Three Months Ended March 31, 2024
CommunicationsResidentialInfrastructure SolutionsCommercial & IndustrialCorporateTotal
Revenues$193,503 $339,372 $75,789 $97,069 $ $705,733 
Cost of services154,568 250,702 52,044 76,806  534,120 
Gross profit38,935 88,670 23,745 20,263  171,613 
Selling, general and administrative16,988 55,258 7,627 8,707 6,692 95,272 
Contingent consideration—  — — —  
Gain on sale of assets(16)(1,275) (68)(14)(1,373)
Operating income (loss)$21,963 $34,687 $16,118 $11,624 $(6,678)$77,714 
 Other data:
Depreciation and amortization expense$866 $5,012 $1,229 $485 $229 $7,821 
Capital expenditures$936 $3,424 $884 $1,397 $203 $6,844 
Total assets$230,386 $396,760 $200,476 $98,845 $174,697 $1,101,164 
Three Months Ended March 31, 2023
CommunicationsResidentialInfrastructure SolutionsCommercial & IndustrialCorporateTotal
Revenues$141,120 $306,112 $52,616 $69,033 $ $568,881 
Cost of services115,957 251,281 38,421 62,296  467,955 
Gross profit25,163 54,831 14,195 6,737  100,926 
Selling, general and administrative13,386 37,999 5,990 6,400 5,574 69,349 
Contingent consideration— 69  —  69 
Gain on sale of assets(3)  (99) (102)
Operating income (loss)$11,780 $16,763 $8,205 $436 $(5,574)$31,610 
Other data:
Depreciation and amortization expense$502 $4,557 $1,326 $412 $67 $6,864 
Capital expenditures$480 $2,379 $560 $546 $ $3,965 
Total assets$188,937 $389,946 $173,621 $87,721 $48,863 $889,088 

Six Months Ended March 31, 2024
CommunicationsResidentialInfrastructure SolutionsCommercial & IndustrialCorporateTotal
Revenues$364,251 $655,228 $138,677 $182,021 $ $1,340,177 
Cost of services289,041 491,127 96,741 147,851  1,024,760 
Gross profit75,210 164,101 41,936 34,170  315,417 
Selling, general and administrative31,889 106,636 14,912 15,554 12,131 181,122 
Contingent consideration— 35 — — — 35 
Gain on sale of assets(20)(1,357) (53)(14)(1,444)
Operating income (loss)$43,341 $58,787 $27,024 $18,669 $(12,117)$135,704 
Other data:
Depreciation and amortization expense$1,589 $9,974 $2,456 $960 $459 $15,438 
Capital expenditures$1,936 $6,788 $2,035 $2,218 $382 $13,359 
Total assets$230,386 $396,760 $200,476 $98,845 $174,697 $1,101,164 
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Six Months Ended March 31, 2023
CommunicationsResidentialInfrastructure SolutionsCommercial & IndustrialCorporateTotal
Revenues$288,365 $624,190 $101,900 $129,300 $ $1,143,755 
Cost of services241,464 509,740 77,238 118,949  947,391 
Gross profit46,901 114,450 24,662 10,351  196,364 
Selling, general and administrative25,683 77,050 11,751 12,089 10,544 137,117 
Contingent consideration— 138 — — — 138 
Gain on sale of assets(3)(6)(19)(13,134) (13,162)
Operating income (loss)$21,221 $37,268 $12,930 $11,396 $(10,544)$72,271 
Other data:
Depreciation and amortization expense$932 $8,701 $2,680 $804 $135 $13,252 
Capital expenditures$1,122 $3,087 $1,199 $1,269 $ $6,677 
Total assets$188,937 $389,946 $173,621 $87,721 $48,863 $889,088 

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 570,655 shares were available for issuance at March 31, 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 4,048 and 223,779 shares, respectively, of our common stock during the three and six months ended March 31, 2023 in open market transactions at an average price of $34.97 and $31.05 per share, respectively. We made no repurchases of common stock in open market transactions during the three and six months ended March 31, 2024.

Treasury Stock

During the six months ended March 31, 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 six months ended March 31, 2024, we issued 1,000 unrestricted shares to satisfy the exercise of certain outstanding option awards under the Equity Incentive Plan.

During the six months ended March 31, 2023, we issued 71,013 shares of common stock from treasury stock to employees and repurchased 19,347 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 six months ended March 31, 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.
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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 March 31, 2024, the Company had outstanding Employee PSUs, which, subject to the achievement of certain performance metrics, could result in the issuance of 323,973 shares of common stock. During the six months ended March 31, 2024, we granted 85,434 Employee PSUs, 5,094 were forfeited, and 82,180 vested.
A summary of the compensation expense related to our stock awards recognized during the three and six months ended March 31, 2024 and 2023 is provided in the table below:

Three Months Ended March 31,Six Months Ended March 31,
2024202320242023
Restricted stock awards$ $ $ $25 
Director PSUs$134 $94 $230 $190 
Employee PSUs$1,380 $958 $2,695 $1,740 

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 March 31, 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 March 31, 2024 and September 30, 2023, are summarized in the following tables by the type of inputs applicable to the fair value measurements:
March 31, 2024
Total Fair ValueQuoted Prices (Level 1)Significant Unobservable Inputs (Level 3)
Equity securities$13,048 $13,048 $— 
Debt securities classified as trading securities4,444 4,444 — 
Executive savings plan assets925 925 — 
Executive savings plan liabilities(793)(793)— 
Total$17,624 $17,624 $ 

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September 30, 2023
Total Fair ValueQuoted Prices (Level 1)Significant Unobservable Inputs (Level 3)
Executive savings plan assets$783 $783 $— 
Executive savings plan liabilities(657)(657)— 
Contingent consideration liability(4,465)— (4,465)
Total$(4,339)$126 $(4,465)

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 March 31, 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, 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 March 31,Six Months Ended March 31,
2024202320242023
Unrealized loss on equity securities$(1,852)$ $(1,852)$ 
Unrealized gain (loss) on debt securities(57) 62  
Total unrealized loss on trading securities$(1,909)$ $(1,790)$ 

In fiscal year 2021, we entered into a contingent consideration arrangement related to the acquisition of Bayonet. The table below presents the change in fair value of this obligation, which used significant unobservable inputs (Level 3). This o