Form 10-Q IES Holdings, Inc. For: Dec 31

February 3, 2023 7:48 AM EST

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(Mark One)
For the quarterly period endedDecember 31, 2022
For the transition period from                      to                     
Commission file number
IES Holdings, Inc.
(Exact name of registrant as specified in its charter)

(State or other jurisdiction of(I.R.S. Employer
incorporation or organization)Identification No.)
5433 Westheimer Road, Suite 500, 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
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 January 31, 2023, there were 20,169,805 shares of common stock outstanding.






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.


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 Russia's invasion of Ukraine 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 the COVID-19 pandemic or any 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;

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;

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 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 certain tax benefits of our net operating losses may be restricted or reduced in a change in ownership or 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, complete acquisitions, and for debt service;

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, which could lead to project delays or cancellations;

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, as a result of which it could be 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, as a result of 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;

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, 2022, 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.

Item 1. Financial Statements
Condensed Consolidated Balance Sheets
(In Thousands, Except Share Information)
December 31,September 30,
Cash and cash equivalents$5,245 $24,848 
Accounts receivable:
Trade, net of allowance of $3,738 and $5,361, respectively
348,216 370,726 
Retainage70,348 65,065 
Inventories99,626 96,333 
Costs and estimated earnings in excess of billings44,515 52,076 
Prepaid expenses and other current assets21,392 15,350 
Total current assets589,342 624,398 
Property and equipment, net53,850 54,426 
Goodwill92,395 92,395 
Intangible assets, net66,738 71,936 
Deferred tax assets20,969 20,519 
Operating right of use assets56,728 55,890 
Other non-current assets16,794 15,145 
Total assets$896,816 $934,709 
Accounts payable and accrued expenses281,447 316,950 
Billings in excess of costs and estimated earnings95,442 84,936 
Total current liabilities376,889 401,886 
Long-term debt41,997 81,628 
Operating long-term lease liabilities38,763 38,144 
Other non-current liabilities27,883 22,570 
Total liabilities485,532 544,228 
Noncontrolling interest33,233 29,193 
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 20,173,853 and 20,341,900 outstanding, respectively
220 220 
Treasury stock, at cost, 1,875,676 and 1,707,629 shares, respectively
Additional paid-in capital200,940 201,871 
Retained earnings226,544 203,197 
Total stockholders’ equity378,051 361,288 
Total liabilities and stockholders’ equity$896,816 $934,709 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.


Condensed Consolidated Statements of Comprehensive Income
(In Thousands, Except Share Information)
Three Months Ended December 31,
Revenues$574,874 $480,509 
Cost of services479,436 400,782 
Gross profit95,438 79,727 
Selling, general and administrative expenses67,768 59,402 
Contingent consideration69 69 
Gain on sale of assets(13,060)(5)
Operating income40,661 20,261 
Interest and other (income) expense:
Interest expense1,184 436 
Other expense, net695 765 
Income from operations before income taxes38,782 19,060 
Provision for income taxes10,028 3,981 
Net income28,754 15,079 
Net income attributable to noncontrolling interest(2,352)(615)
Comprehensive income attributable to IES Holdings, Inc.$26,402 $14,464 
Earnings per share attributable to common stockholders of IES Holdings, Inc.:
Shares used in the computation of earnings per share:

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.


Condensed Consolidated Statements of Stockholders’ Equity (unaudited)
(In Thousands, Except Share Information)
Three Months Ended December 31, 2022
Common StockTreasury StockRetained EarningsTotal Stockholders' Equity
SharesAmountSharesAmountAdditional Paid-In Capital
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— — (239,060)(7,496)7 — (7,489)
Non-cash compensation— — — — 905 — 905 
Increase in noncontrolling interest— — — — — (3,055)(3,055)
Net income attributable to IES Holdings, Inc.— — — — — 26,402 26,402 
BALANCE, December 31, 202222,049,529 $220 (1,875,676)$(49,653)$200,940 $226,544 $378,051 

Three Months Ended December 31, 2021
Common StockTreasury StockRetained EarningsTotal Stockholders' Equity
SharesAmountSharesAmountAdditional Paid -In Capital
BALANCE, September 30, 202122,049,529 $220 (1,316,998)$(29,300)$201,899 $173,134 $345,953 
Issuances under compensation plans— — 157,167 3,637 (3,637)— — 
Acquisition of treasury stock— — (101,613)(4,797) — (4,797)
Non-cash compensation— — — — 900 — 900 
Increase in noncontrolling interest— — — — — (60)(60)
Net income attributable to IES Holdings, Inc.— — — — — 14,464 14,464 
BALANCE, December 31, 202122,049,529 $220 (1,261,444)$(30,460)$199,162 $187,538 $356,460 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

Condensed Consolidated Statements of Cash Flows
(In Thousands)
Three Months Ended December 31,
Net income$28,754 $15,079 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Bad debt expense63 92 
Deferred financing cost amortization65 47 
Depreciation and amortization6,388 6,214 
Gain on sale of assets(13,060)(5)
Non-cash compensation expense905 900 
Deferred income tax expense533 2,195 
Changes in operating assets and liabilities:
Accounts receivable18,142 (8,173)
Costs and estimated earnings in excess of billings7,562 (9,140)
Prepaid expenses and other current assets(11,766)(5,366)
Other non-current assets103 (1,564)
Accounts payable and accrued expenses(29,780)(23,169)
Billings in excess of costs and estimated earnings10,722 3,756 
Other non-current liabilities826 (137)
Net cash provided by (used in) operating activities14,344 (24,463)
Purchases of property and equipment(2,712)(12,339)
Proceeds from sale of assets19,205 84 
Cash paid in conjunction with equity investments(165)(500)
Net cash provided by (used in) investing activities16,328 (12,755)
Borrowings of debt607,974 444,159 
Repayments of debt(647,639)(415,937)
Cash paid for finance leases(773)(270)
Distribution to noncontrolling interest(2,348)(1,215)
Purchase of treasury stock(7,489)(4,798)
Net cash provided by (used in) financing activities(50,275)21,939 
CASH AND CASH EQUIVALENTS, beginning of period24,848 23,105 
CASH AND CASH EQUIVALENTS, end of period$5,245 $7,826 
Cash paid for interest$1,001 $501 
Cash paid for income taxes (net)$63 $9 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

Notes to the Condensed Consolidated Financial Statements
(All Amounts in Thousands Except Share Amounts)

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, 2022. 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. The purchase price is variable, based on a multiple of earnings as defined in the operating agreements. Therefore, this noncontrolling interest is carried at the greater of the balance determined under Accounting Standards Codification 810 and the redemption amounts

assuming the noncontrolling interests were redeemable at the balance sheet date. If all of the noncontrolling interests remaining outstanding at December 31, 2022 had been redeemable at that date, the redemption amount would have been $31,750.

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 and analyzing goodwill, investments, intangible assets and long-lived asset impairments and adjustments, allowance for credit losses, stock-based compensation, reserves for legal matters, realizability of deferred tax assets, unrecognized tax benefits and self-insured claims liabilities and related reserves.

Other (Income) Expense, Net

Other (Income) Expense, Net includes primarily unrealized gains or losses on equity securities, including those related to our Executive Deferred Compensation Plan. These securities are recorded at fair value (Level 1) at the end of each reporting period. Please refer to Note 9 - Fair Value Measurements for further information.


Tontine Associates, L.L.C. (“Tontine Associates”), together with its affiliates (collectively, “Tontine”), is the Company’s controlling stockholder, owning approximately 58 percent of the Company’s outstanding common stock based on Amendment No. 26 to the Schedule 13D filed by Tontine with the SEC on December 16, 2022 and the Company's shares outstanding as of January 31, 2023. 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 ownership of IES could occur. A change in ownership, as defined by Internal Revenue Code Section 382, could reduce the availability of the Company’s net operating loss carryforwards for federal and state income tax purposes. Furthermore, 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 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.



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 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 segment, 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 we have the right to bill the customer as costs are incurred. Such assessment involves an evaluation of contractual termination clauses. Where 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 fixed price arrangements, 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.
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 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 months ended December 31, 2022 and 2021 was derived from the following activities. See details in the following tables:
Three Months Ended December 31,
Communications$147,245 $127,389 
Single-family226,828 173,528 
Multi-family and Other91,250 68,248 
Total Residential318,078 241,776 
Infrastructure Solutions
Industrial Services20,099 14,816 
Custom Power Solutions29,185 27,280 
Total Infrastructure Solutions49,284 42,096 
Commercial & Industrial60,267 69,248 
Total Revenue$574,874 $480,509 

Three Months Ended December 31, 2022
CommunicationsResidentialInfrastructure SolutionsCommercial & IndustrialTotal
Fixed-price$87,274 $318,078 $47,546 $54,597 $507,495 
Time-and-material59,971  1,738 5,670 67,379 
Total revenue$147,245 $318,078 $49,284 $60,267 $574,874 
Three Months Ended December 31, 2021
CommunicationsResidentialInfrastructure SolutionsCommercial & IndustrialTotal
Fixed-price$88,422 $241,776 $40,453 $64,860 $435,511 
Time-and-material38,967  1,643 4,388 44,998 
Total revenue$127,389 $241,776 $42,096 $69,248 $480,509 

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 December 31, 2022, Accounts receivable included $15,135 of unbilled receivables for which we have an unconditional right to bill.

In calculating our expected credit losses, we considered trade receivables, retainage, and costs and estimated earnings in excess of billings, all of which constitute a homogenous portfolio, and therefore, to measure the expected credit loss, they have been grouped together.

We have elected to calculate an expected credit loss based on loss rates from historical data. Each segment groups financial assets with similar risk characteristics and collectively assesses the expected credit losses. If an individual asset experiences credit deterioration to the extent the credit risk is no longer characteristic of the other assets in the group, it will be analyzed individually. The loss rates for our portfolios include our history of credit loss expense, the aging of our receivables, our expectation of payments and adjustment for forward-looking factors specific to the macroeconomic trends in the markets we serve.

Other than trade receivables due in one year or less, we do not have any other financial assets that are past due or are on non-accrual status.


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 Sheet 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 Sheet under the caption “Billings in excess of costs and estimated earnings”.

During the three months ended December 31, 2022 and 2021, we recognized revenue of $38,047 and $28,341 related to our contract liabilities at October 1, 2022 and 2021, 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 December 31, 2022, we had remaining performance obligations of $1,011,018. The Company expects to recognize revenue on approximately $921,848 of the remaining performance obligations over the next 12 months, with the remainder recognized thereafter.
For the three months ended December 31, 2022, net revenue recognized from our performance obligations satisfied in previous periods was not material.

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, 2022. As of December 31, 2022, the Company was in compliance with the financial covenants under the Amended Credit Agreement.

At December 31, 2022 and September 30, 2022, we had $42,995 and $82,659, respectively, in borrowings outstanding under our revolving credit facility. At December 31, 2022, we also had $5,892 in outstanding letters of credit and total availability of $101,113 under our revolving credit facility without triggering the financial covenants under the Amended Credit Facility.

The following tables reconcile the components of basic and diluted earnings (loss) per share for the three months ended December 31, 2022 and 2021:
Three Months Ended December 31,
Net income attributable to IES Holdings, Inc.$26,402 $14,464 
Increase in noncontrolling interest(3,055)(60)
Net income attributable to restricted stockholders of IES Holdings, Inc.(11)(11)
Net income attributable to common stockholders of IES Holdings, Inc.$23,336 $14,393 
Weighted average common shares outstanding — basic20,242,114 20,702,844 
Effect of dilutive stock options and non-vested securities206,921 256,043 
Weighted average common and common equivalent shares outstanding — diluted
20,449,035 20,958,887 
Earnings per share attributable to common stockholders of IES Holdings, Inc.:
Basic$1.15 $0.70
Diluted$1.14 $0.69

For the three months ended December 31, 2022 and 2021, the average price of our common shares exceeded the exercise price of all of our outstanding stock options; therefore, all of our outstanding stock options and other potentially dilutive equity instruments were included in the computation of diluted earnings per share.

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.

Segment information for the three months ended December 31, 2022 and 2021 is as follows:
Three Months Ended December 31, 2022
CommunicationsResidentialInfrastructure SolutionsCommercial & IndustrialCorporateTotal
Revenues$147,245 $318,078 $49,284 $60,267 $ $574,874 
Cost of services125,507 258,459 38,817 56,653  479,436 
Gross profit21,738 59,619 10,467 3,614  95,438 
Selling, general and administrative12,297 39,051 5,761 5,689 4,970 67,768 
Contingent consideration— 69 — — — 69 
Gain on sale of assets (6)(19)(13,035) (13,060)
Operating income (loss)$9,441 $20,505 $4,725 $10,960 $(4,970)$40,661 
 Other data:
Depreciation and amortization expense$430 $4,144 $1,354 $392 $68 $6,388 
Capital expenditures$642 $708 $639 $723 $ $2,712 
Total assets$203,500 $395,243 $163,201 $79,548 $55,324 $896,816 
Three Months Ended December 31, 2021
CommunicationsResidentialInfrastructure SolutionsCommercial & IndustrialCorporateTotal
Revenues$127,389 $241,776 $42,096 $69,248 $ $480,509 
Cost of services106,891 199,138 34,375 60,378  400,782 
Gross profit20,498 42,638 7,721 8,870  79,727 
Selling, general and administrative11,384 30,995 6,059 7,268 3,696 59,402 
Contingent consideration— 69 — — — 69 
Loss (gain) on sale of assets(6)8  (7) (5)
Operating income (loss)$9,120 $11,566 $1,662 $1,609 $(3,696)$20,261 
Other data:
Depreciation and amortization expense$359 $3,852 $1,343 $630 $30 $6,214 
Capital expenditures$594 $1,184 $10,316 $245 $ $12,339 
Total assets$161,419 $338,824 $145,722 $94,157 $45,106 $785,228 


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 605,313 shares were available for issuance at December 31, 2022.


Stock Repurchase Program

In 2015, our Board authorized a stock repurchase program for the purchase from time to time of up to 1.5 million shares of the Company’s common stock, and in 2019 authorized the repurchase from time to time of up to an additional 1.0 million shares under the program. In December 2022, our Board terminated the remaining authorization under this program, and approved a new $40,000 share 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 219,731 and 56,415 shares, respectively, of our common stock during the three months ended December 31, 2022 and 2021 in open market transactions at an average price of $30.97 and $46.71, respectively, per share.

Treasury Stock

During the three months ended December 31, 2022, we issued 71,013 shares of common stock from treasury stock to employees and repurchased 19,142 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, 187 restricted shares were forfeited and returned to treasury stock.

During the three months ended December 31, 2021, we issued 73,627 shares of common stock from treasury stock to employees and repurchased 45,198 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, we issued 83,540 shares from treasury stock to satisfy the vesting of Director PSUs (as defined below) in conjunction with the departure of a Board member.

Restricted Stock

We granted no restricted shares to executives during the three months ended December 31, 2022. Of the awards previously granted, 13,452 shares vested and 187 shares were forfeited. During the three months ended December 31, 2022 and 2021, we recognized $25 and $36, respectively, in compensation expense related to all restricted stock awards. At December 31, 2022, we had no remaining unvested restricted shares or unamortized compensation cost related to outstanding unvested restricted stock.

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. During the three months ended December 31, 2022 and 2021, we recognized $97 and $96, respectively, in compensation expense related to these grants.

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 December 31, 2022, the Company had outstanding Employee PSUs, which, subject to the achievement of certain performance metrics, could result in the issuance of 368,527 shares of common stock. During the three months ended December 31, 2022, we granted 130,739 Employee PSUs, 7,160 were forfeited, and 71,013 vested. During the three months ended December 31, 2022 and 2021, we recognized $783 and $768, respectively, in compensation expense related to Employee PSU grants.



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 December 31, 2022, financial assets and liabilities measured at fair value on a recurring basis were limited to 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), equity securities held for sale, and contingent consideration liabilities related to certain of our acquisitions.

Financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2022 and September 30, 2022, are summarized in the following tables by the type of inputs applicable to the fair value measurements:
December 31, 2022
Total Fair ValueQuoted Prices (Level 1)Significant Unobservable Inputs (Level 3)
Executive savings plan assets$740 $740 $— 
Equity securities 1,148 1,148 — 
Executive savings plan liabilities(617)(617)— 
Contingent consideration liability(4,358)— (4,358)
Total$(3,087)$1,271 $(4,358)

September 30, 2022
Total Fair ValueQuoted Prices (Level 1)Significant Unobservable Inputs (Level 3)
Executive savings plan assets$706 $706 $— 
Equity securities1,937 1,937 — 
Executive savings plan liabilities(585)(585)— 
Contingent consideration liability(4,323)— (4,323)
Total$(2,265)$2,058 $(4,323)

In fiscal year 2021, we entered into a contingent consideration arrangement related to the acquisition of Bayonet. At December 31, 2022, we estimated the fair value of this contingent consideration liability at $4,358. The table below presents the change in fair value of this obligation, which used significant unobservable inputs (Level 3).
Contingent Consideration Agreements
Fair value at September 30, 2022$(4,323)
Net adjustments to fair value(35)
Fair value at December 31, 2022$(4,358)



Inventories consist of the following components:
December 31,September 30,
Raw materials$12,822 $12,504 
Work in process8,159 8,218 
Finished goods2,335 2,129 
Parts and supplies76,310 73,482 
Total inventories$99,626 $96,333 



The following summarizes the carrying value of goodwill by segment at December 31, 2022, which was unchanged from September 30, 2022:
CommunicationsResidentialInfrastructure SolutionsCommercial & IndustrialTotal
Goodwill at December 31, 2022$2,816 $51,370 $38,209 $ $92,395 

Intangible Assets

Intangible assets consist of the following:
Estimated Useful Lives (in Years)December 31, 2022
Gross Carrying AmountAccumulated AmortizationNet
Trademarks/trade names5-20$14,621 $(4,611)$10,010 
Technical library20400 (186)214 
Customer relationships6-1591,426 (34,917)56,509 
Non-competition arrangements540 (35)5 
Backlog and construction contracts14,958 (4,958) 
Total intangible assets$111,445 $(44,707)$66,738 

Estimated Useful Lives (in Years)September 30, 2022
Gross Carrying AmountAccumulated AmortizationNet
Trademarks/trade names5-20$15,262 $(4,589)$10,673 
Technical library20400 (181)219 
Customer relationships6-1596,699 (35,662)61,037 
Non-competition arrangements540 (33)7 
Backlog and construction contracts14,958 (4,958) 
Total intangible assets$117,359 $(45,423)$71,936 


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.
On June 22, 2021, the United States Department of Labor Wage and Hour Division (the “DOL”) notified IES Residential, Inc. (“IESR”), a wholly-owned subsidiary of the Company, that the DOL had commenced an administrative investigation of IESR’s

compliance with laws regulating employee wage payment. The inquiry concerned record keeping with respect to certain Arizona employees who are paid on a piece rate basis. We entered into a settlement with the DOL in November 2022, resolving this matter. Costs associated with this matter, which did not have a material impact on our results of operations, were accrued as a liability as of September 30, 2022.
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. At September 30, 2022, we had an aggregate $10,451 of trade accounts receivable where payment had been delayed as a result of contractual disputes and against which we had recorded a reserve of $3,095. During the quarter ended December 31, 2022, we collected $5,140 related to these receivables. We believe that we are contractually entitled to the remaining amounts owed to us, and intend to vigorously pursue recovery. At December 31, 2022, the remaining book value of receivables and retainage related to these contractual disputes, net of associated reserves, was $2,389.

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 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 December 31, 2022 and September 30, 2022, we had $7,695 and $7,693, 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 or that the timing of payments will not create liquidity issues for the Company.

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 December 31, 2022 and September 30, 2022, $5,693 and $3,878, respectively, of our outstanding letters of credit was utilized to collateralize our insurance program.


As of December 31, 2022, the estimated cost to complete our bonded projects was approximately $77,855. 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 December 31, 2022, we had commitments of $6,936 outstanding under agreements to purchase copper wire and other materials over the next 12 months in the ordinary course of business.

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 $17,495 and $3,663, respectively, as of December 31, 2022, and $17,319 and $2,928, respectively, as of September 30, 2022, were included in “Accounts payable and accrued expenses” in the Condensed Consolidated Balance Sheets. Non-current finance lease liabilities and finance lease right-of-use assets were included in the “Other non-current liabilities” and “Other non-current assets”, respectively, in the Condensed Consolidated Balance Sheets.

The maturities of our lease liabilities as of December 31, 2022 are as follows:
Operating LeasesFinance LeasesTotal
Remainder of 2023
$13,802 $2,829 $16,631