SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 4, 2018
IES Holdings, Inc.
(Exact name of registrant as specified in Charter)
| Delaware | 001-13783 | 76-0542208 | ||
| (State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification Number) |
5433 Westheimer Road, Suite 500, Houston, Texas 77056
(Address of Principal Executive Offices)
Registrant’s telephone number, including area code: (713) 860-1500
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2 (b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4 (c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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. ☐
| Item 2.02. | Results of Operations and Financial Condition. |
On May 4, 2018, IES Holdings, Inc. (the “Company”) issued a press release announcing its results of operations for the fiscal 2018 second quarter. A copy of the press release is furnished with this report as Exhibit 99.1.
| Item 7.01 | Regulation FD Disclosure. |
On May 4, 2018, the Company posted to its website, www.ies-co.com, under the Investor Relations section, a presentation with the title “IES Holdings, Inc.– Second Quarter 2018 Update.” A copy of the presentation is furnished with this report as Exhibit 99.2. The presentation will remain on the Company’s website for a period of at least thirty days.
The information set forth herein is furnished pursuant to Item 7.01– Regulation FD Disclosure and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of such section nor shall the information be deemed incorporated by reference in any filing of the Company.
| Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits.
| Exhibit Number |
Description | |
| Exhibit 99.1 | Press release dated May 4, 2018 announcing results of operations. | |
| Exhibit 99.2 | Presentation titled “IES Holdings, Inc.– Second Quarter 2018 Update,” dated May 4, 2018. | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| IES HOLDINGS, INC. | ||||||
| Date: May 4, 2018 | /s/ Gail D. Makode | |||||
| Gail D. Makode | ||||||
| Senior Vice President and General Counsel | ||||||
Exhibit 99.1
Contact: Tracy McLauchlin, CFO
IES Holdings, Inc.
713-860-1500
FOR IMMEDIATE RELEASE
IES Holdings Reports Fiscal 2018 Second Quarter Results
HOUSTON — May 4, 2018 — IES Holdings, Inc. (or “IES” or the “Company”) (NASDAQ: IESC) today announced financial results for the quarter ended March 31, 2018.
Second Quarter 2018 and Year-to-Date Highlights
| • | Revenue of $206 million for the second quarter of fiscal 2018, an increase of 1.0% compared with the second quarter of fiscal 2017; Revenue of $404 million for the year-to-date 2018, an increase of 2.1% compared with the year-to-date 2017 |
| • | Income from operations of $4.1 million for the second quarter of fiscal 2018, an increase of $2.5 million compared with the second quarter of fiscal 2017; Income from operations of $7.1 million for the year-to-date 2018, a decrease of $1.5 million compared with the year-to-date 2017 |
| • | Net income attributable to IES for the second quarter of fiscal 2018 of $2.2 million, or $0.11 per diluted share, an increase of $1.7 million, or $0.09 per diluted share, compared with the second quarter of fiscal 2017; Net loss attributable to IES for the year-to-date 2018 of $27 million, or $1.29 per diluted share, a decrease of $32 million, or $1.49 per diluted share, compared with the year-to-date 2017, primarily driven by a $31.5 million preliminary charge in fiscal 2018 related to the enactment of the Tax Cuts and Jobs Act |
| • | Adjusted net income attributable to IES (a non-GAAP financial measure, as defined below) for the second quarter of fiscal 2018 of $3.4 million, or $0.16 per diluted share, an increase of $2.3 million, or $0.11 per diluted share, compared with the second quarter of fiscal 2017; Adjusted net income attributable to IES for the year-to-date 2017 of $5.8 million, or $0.27 per diluted share, a decrease of $1.3 million, or $0.05 per diluted share, compared with the year-to-date 2017 |
| • | Backlog of approximately $343 million as of March 31, 2018, as compared to approximately $337 million as of December 31, 2017 and approximately $335 million as of March 31, 2017 |
Management Commentary
Robert Lewey, President, stated, “Our second quarter performance was solid across most of our operations. We believe our increased backlog positions us for a strong second half of our fiscal year with improving profitability.”
Mr. Lewey continued, “Our Communications segment showed strong margins during the quarter and maintains a robust pipeline of opportunities. We continue to see our largest customers expand their data center capacity and invest in new technologies. Our Residential segment continued to benefit from a healthy single family market. Looking forward to the second half of the year, we are pleased with the progress made in our Commercial & Industrial segment, where we expect to see improving performance driven by a combination of increased backlog and reduced impact from the wind-down of two of our Commercial & Industrial branches.”
Tracy McLauchlin, Chief Financial Officer, added, “Year-to-date we have generated $11 million of cash from operations and continued to maintain our strong balance sheet. Additionally, on April 6, 2018, we were pleased to close the acquisition of Azimuth Communications, which was our Communications segment’s first acquisition and supports our expansion into the attractive Pacific Northwest region. While our Residential segment’s margins were negatively impacted during the quarter by an increase in commodity prices, we remain optimistic about the housing market and opportunities for our Residential segment.”
Net Operating Loss Carryforwards
The Company estimates that it has available Net Operating Loss Carryforwards (NOLs) for U.S. federal income tax purposes of approximately $378 million at September 30, 2017, including approximately $142 million resulting from the additional amortization of personal goodwill. The Company’s common stock is subject to a Rights Plan dated November 8, 2016, which is intended to assist in limiting the number of 5% or more owners of the Company’s common stock and, thereby reduce the risk of a possible “change of ownership” under Section 382 of the Internal Revenue Code of 1986, as amended. Any such “change of ownership” under these rules would limit or eliminate the ability of the Company to use its existing NOLs for federal income tax purposes. There is no guarantee that the Rights Plan will achieve the objective of preserving the value or realization of the NOLs.
Stock Buyback Plan
The Company’s Board of Directors has authorized and previously announced a stock repurchase program for purchasing up to 1.5 million shares of our common stock from time to time. During the quarter ended March 31, 2018, the Company repurchased 79,817 shares at an average price of $15.40 per share. The Company had 736,901 shares remaining under its stock repurchase authorization at March 31, 2018.
Non-GAAP Financial Measures and Other Adjustments
This press release includes adjusted net income attributable to IES and, in the non-GAAP reconciliation table included herein, adjusted net income before taxes, both of which are financial measures not calculated in accordance with generally accepted accounting principles in the U.S. (“GAAP”). Management believes that these measures provide useful information to our investors by distinguishing certain noncash events such as our valuation allowances release and write-down of our net deferred tax assets, and that these measures, when reconciled to net income attributable to IES, which is the most directly comparable GAAP measure, help our investors to better identify underlying trends in the operations of our business and facilitate easier comparisons of our financial performance with prior and future periods and to our peers. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information calculated in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures. A reconciliation of these non-GAAP financial measures to GAAP results has been provided in the financial tables included in this press release.
For further details on the Company’s financial results, please refer to the Company’s quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2018, to be filed with the Securities and Exchange Commission (“SEC”) by May 4, 2018, and any amendments thereto.
About IES Holdings, Inc.
IES is a holding company that owns and manages diverse operating subsidiaries, comprised of providers of industrial infrastructure services to a variety of end markets. Our approximately 3,500 employees serve clients in the United States. For more information about IES, please visit www.ies-co.com.
Certain statements in this release may be deemed “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, 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, the ability of our controlling shareholder to take action not aligned with other shareholders; the possibility that certain tax benefits of our net operating losses may be restricted or reduced in a change in ownership or a further change in the federal tax rate; the potential recognition of valuation allowances or further write-downs on net deferred tax assets; the inability to carry out plans and strategies as expected, including underperformance of our acquisitions or our inability to identify and complete acquisitions that meet our investment criteria in furtherance of our corporate strategy; 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; fluctuations in operating activity due to downturns in levels of construction, seasonality and differing regional economic conditions; and our ability to successfully manage projects, as well as other risk factors discussed in this document, in the Company’s annual report on Form 10-K for the year ended September 30, 2017 and in the Company’s other reports on file with the SEC. You should understand that such risk factors could cause future outcomes to differ materially from those experienced previously or those expressed in such forward-looking statements. The Company undertakes no obligation to publicly update or revise any information, including information concerning its 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 release.
Forward-looking statements are provided in this press release 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.
General information about IES Holdings, Inc. can be found at http://www.ies-co.com under “Investors.” The Company’s annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, as well as any amendments to those reports, are available free of charge through the Company’s website as soon as reasonably practicable after they are filed with, or furnished to, the SEC.
IES HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
(UNAUDITED)
| Three Months Ended March 31, | Six Months Ended March 31, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Revenues |
$ | 205.7 | $ | 203.7 | $ | 404.0 | $ | 395.8 | ||||||||
| Cost of services |
171.8 | 171.8 | 337.1 | 328.8 | ||||||||||||
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| Gross profit |
33.8 | 31.8 | 66.9 | 67.0 | ||||||||||||
| Selling, general and administrative expenses |
29.6 | 30.1 | 59.7 | 58.3 | ||||||||||||
| Contingent consideration expense |
0.1 | 0.1 | 0.1 | 0.1 | ||||||||||||
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| Income from operations |
4.1 | 1.6 | 7.1 | 8.6 | ||||||||||||
| Interest expense, net |
0.5 | 0.4 | 0.9 | 0.9 | ||||||||||||
| Other expense (income), net |
— | — | (0.1 | ) | — | |||||||||||
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| Income from continuing operations before income taxes |
3.7 | 1.2 | 6.4 | 7.8 | ||||||||||||
| Provision (benefit) for income taxes |
1.4 | 0.7 | 33.6 | 3.3 | ||||||||||||
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| Net income (loss) |
2.3 | 0.6 | (27.2 | ) | 4.5 | |||||||||||
| Net income attributable to noncontrolling interest |
(0.1 | ) | — | (0.1 | ) | (0.1 | ) | |||||||||
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| Net income (loss) attributable to IES Holdings, Inc. |
$ | 2.2 | $ | 0.5 | ($ | 27.3 | ) | $ | 4.4 | |||||||
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| Earnings per share attributable to IES Holdings, Inc.: |
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| Basic |
$ | 0.11 | $ | 0.02 | ($ | 1.29 | ) | $ | 0.21 | |||||||
| Diluted |
$ | 0.11 | $ | 0.02 | ($ | 1.29 | ) | $ | 0.20 | |||||||
| Shares used in the computation of earnings per share: |
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| Basic (in thousands) |
21,182 | 21,299 | 21,190 | 21,293 | ||||||||||||
| Diluted (in thousands) |
21,441 | 21,574 | 21,190 | 21,561 | ||||||||||||
IES HOLDINGS, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATION OF ADJUSTED NET INCOME
ATTRIBUTABLE TO IES HOLDINGS, INC. AND ADJUSTED EARNINGS PER SHARE
ATTRIBUTABLE TO IES HOLDINGS, INC. (DOLLARS IN MILLIONS)
(UNAUDITED)
| Three Months Ended March 31, | Six Months Ended March 31, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Net income attributable to IES Holdings, Inc. |
$ | 2.2 | $ | 0.5 | ($ | 27.3 | ) | $ | 4.4 | |||||||
| Provision (benefit) for income taxes |
1.4 | 0.7 | 33.6 | 3.3 | ||||||||||||
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| Adjusted net income before taxes |
3.6 | 1.2 | 6.2 | 7.7 | ||||||||||||
| Current tax expense (1) |
(0.3 | ) | (0.1 | ) | (0.4 | ) | (0.6 | ) | ||||||||
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| Adjusted net income attributable to IES Holdings, Inc. |
$ | 3.4 | $ | 1.1 | $ | 5.8 | $ | 7.1 | ||||||||
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| Adjusted earnings per share attributable to IES Holdings, Inc.: |
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| Basic |
$ | 0.16 | $ | 0.05 | $ | 0.27 | $ | 0.33 | ||||||||
| Diluted |
$ | 0.16 | $ | 0.05 | $ | 0.27 | $ | 0.33 | ||||||||
| Shares used in the computation of adjusted earnings per share: |
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| Basic (in thousands) |
21,182 | 21,299 | 21,190 | 21,293 | ||||||||||||
| Diluted (in thousands) |
21,441 | 21,574 | 21,190 | 21,561 | ||||||||||||
| (1) | Represents the tax expense for the current period which will be paid in cash, and not offset by the utilization of deferred tax assets |
IES HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS)
(UNAUDITED)
| March 31, 2018 | September 30, 2017 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: |
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| Cash and cash equivalents |
$ | 35.7 | $ | 28.3 | ||||
| Accounts receivable: |
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| Trade, net of allowance |
127.9 | 142.9 | ||||||
| Retainage |
20.6 | 21.4 | ||||||
| Inventories |
17.6 | 16.9 | ||||||
| Costs and estimated earnings in excess of billings |
15.4 | 13.4 | ||||||
| Prepaid expenses and other current assets |
9.5 | 8.8 | ||||||
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| Total current assets |
226.6 | 231.8 | ||||||
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| Property and equipment, net |
25.1 | 24.6 | ||||||
| Goodwill |
46.7 | 46.7 | ||||||
| Intangible assets |
29.5 | 31.4 | ||||||
| Deferred tax assets |
50.9 | 86.2 | ||||||
| Other non-current assets |
6.1 | 3.8 | ||||||
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| Total assets |
$ | 385.0 | $ | 424.5 | ||||
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| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: |
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| Accounts payable and accrued expenses |
$ | 111.6 | $ | 120.7 | ||||
| Billings in excess of costs and estimated earnings |
27.8 | 29.9 | ||||||
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| Total current liabilities |
139.4 | 150.6 | ||||||
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| Long-term debt, net of current maturities |
29.6 | 29.4 | ||||||
| Other non-current liabilities |
4.6 | 4.5 | ||||||
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| Total liabilities |
173.6 | 184.5 | ||||||
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| Noncontrolling interest |
3.3 | 3.3 | ||||||
| STOCKHOLDERS’ EQUITY: |
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| Preferred stock |
— | — | ||||||
| Common stock |
0.2 | 0.2 | ||||||
| Treasury stock, at cost |
(8.1 | ) | (6.9 | ) | ||||
| Additional paid-in capital |
196.8 | 197.0 | ||||||
| Retained earnings |
19.1 | 46.4 | ||||||
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| Total stockholders’ equity |
208.1 | 236.7 | ||||||
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| Total liabilities and stockholders’ equity |
$ | 385.0 | $ | 424.5 | ||||
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IES HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
(UNAUDITED)
| Six Months Ended March 31, | ||||||||
| 2018 | 2017 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
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| Net income (loss) |
($ | 27.2 | ) | $ | 4.5 | |||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
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| Bad debt expense |
0.1 | — | ||||||
| Deferred financing cost amortization |
0.1 | 0.2 | ||||||
| Depreciation and amortization |
4.3 | 4.4 | ||||||
| Deferred income taxes |
33.6 | 2.7 | ||||||
| Non-cash compensation |
(0.1 | ) | 0.9 | |||||
| Changes in operating assets and liabilities, net of effects of acquisitions and divestitures: |
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| Accounts receivable |
14.9 | (0.4 | ) | |||||
| Inventories |
(0.7 | ) | (3.3 | ) | ||||
| Costs and estimated earnings in excess of billings |
(1.9 | ) | (3.5 | ) | ||||
| Prepaid expenses and other current assets |
0.1 | (5.6 | ) | |||||
| Other non-current assets |
(0.1 | ) | 0.6 | |||||
| Accounts payable and accrued expenses |
(10.1 | ) | 0.2 | |||||
| Billings in excess of costs and estimated earnings |
(2.1 | ) | 1.5 | |||||
| Other non-current liabilities |
0.2 | 0.6 | ||||||
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| Net cash provided by operating activities |
11.2 | 2.7 | ||||||
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| CASH FLOWS FROM INVESTING ACTIVITIES: |
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| Purchases of property and equipment |
(2.3 | ) | (2.9 | ) | ||||
| Proceeds from sale of property and equipment |
0.1 | — | ||||||
| Cash paid for acquisitions |
(0.2 | ) | (11.7 | ) | ||||
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| Net cash used in investing activities |
(2.4 | ) | (14.5 | ) | ||||
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| CASH FLOWS FROM FINANCING ACTIVITIES: |
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| Borrowings of debt |
0.1 | 5.1 | ||||||
| Repayments of debt |
(0.1 | ) | (5.1 | ) | ||||
| Contingent consideration payment |
— | (0.4 | ) | |||||
| Distribution to noncontrolling interest |
(0.1 | ) | (0.1 | ) | ||||
| Options exercised |
— | 0.1 | ||||||
| Purchase of treasury stock |
(1.2 | ) | — | |||||
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| Net cash used in financing activities |
(1.3 | ) | (0.5 | ) | ||||
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| NET INCREASE (DECREASE) IN CASH EQUIVALENTS |
7.4 | (12.4 | ) | |||||
| CASH AND CASH EQUIVALENTS, beginning of period |
28.3 | 33.2 | ||||||
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| CASH AND CASH EQUIVALENTS, end of period |
$ | 35.7 | $ | 20.8 | ||||
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IES HOLDINGS, INC. AND SUBSIDIARIES
OPERATING SEGMENT STATEMENTS OF OPERATIONS
(DOLLARS IN MILLIONS)
(UNAUDITED)
| Three Months Ended March 31, |
Six Months Ended March 31, |
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| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Revenue |
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| Commercial & Industrial |
$ | 65.6 | $ | 55.3 | $ | 118.6 | $ | 109.2 | ||||||||
| Communications |
50.2 | 61.7 | 104.7 | 115.0 | ||||||||||||
| Infrastructure Solutions |
23.9 | 18.8 | 45.6 | 37.3 | ||||||||||||
| Residential |
66.0 | 67.9 | 135.1 | 134.4 | ||||||||||||
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| Total Revenue |
$ | 205.7 | $ | 203.7 | $ | 404.0 | $ | 395.8 | ||||||||
| Operating Income |
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| Commercial & Industrial |
($ | 0.3 | ) | ($ | 2.6 | ) | ($ | 1.3 | ) | ($ | 0.8 | ) | ||||
| Communications |
3.2 | 3.2 | 6.2 | 5.4 | ||||||||||||
| Infrastructure Solutions |
0.3 | — | 0.4 | 1.3 | ||||||||||||
| Residential |
3.3 | 4.6 | 7.3 | 9.8 | ||||||||||||
| Corporate |
(2.3 | ) | (3.6 | ) | (5.6 | ) | (7.1 | ) | ||||||||
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| Total Operating Income |
$ | 4.1 | $ | 1.6 | $ | 7.1 | $ | 8.6 | ||||||||
IES HOLDINGS, INC. AND SUBSIDIARIES
WIND-DOWN STATEMENTS OF OPERATIONS*
(DOLLARS IN MILLIONS)
(UNAUDITED)
| Three Months Ended March 31, |
Six Months Ended March 31, |
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| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Revenues |
$ | 3.9 | $ | 9.4 | $ | 7.1 | $ | 19.8 | ||||||||
| Cost of service |
4.0 | 11.9 | 7.3 | 22.1 | ||||||||||||
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| Gross profit |
— | (2.5 | ) | (0.2 | ) | (2.3 | ) | |||||||||
| Selling, general and administrative expenses |
0.5 | 0.8 | 0.9 | 1.5 | ||||||||||||
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| Income from operations |
($ | 0.5 | ) | ($ | 3.3 | ) | ($ | 1.1 | ) | ($ | 3.7 | ) | ||||
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| * | Includes results from the Denver and Roanoke branches of our Commercial & Industrial segment. In July, 2017, we implemented a plan to wind-down operations at these branches. |
Exhibit 99.2
IES Holdings, Inc.
Second Quarter 2018 Update
IES
Disclosures
Forward-Looking Statements
Certain statements in this document may be deemed
“forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, 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, the ability of our controlling shareholder to take action not aligned with other shareholders; the possibility that certain tax benefits of our net operating losses may be restricted or reduced in a change in ownership or a
further change in the federal tax rate; the potential recognition of valuation allowances or further write-downs on net deferred tax assets; the inability to carry out plans and strategies as expected, including underperformance of our acquisitions
or our inability to identify and complete acquisitions that meet our investment criteria in furtherance of our corporate strategy; 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; fluctuations in operating activity due to downturns in levels of construction, seasonality and differing regional economic conditions; and our ability to successfully manage
projects, as well as other risk factors discussed in this document, in the Company’s annual report on Form 10-K for the year ended September 30, 2017 and in the Company’s other reports on file with the SEC. You should understand that
such risk factors could cause future outcomes to differ materially from those experienced previously or those expressed in such forward-looking statements. The Company undertakes no obligation to publicly update or revise any information, including
information concerning its 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 document. Forward-looking
statements are provided in this press document 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.
Non-GAAP Financial Measures and Other Adjustments
This
document includes adjusted net income attributable to IES and, in the non-GAAP reconciliation table included herein, adjusted net income before taxes, both of which are financial measures not calculated in accordance with generally accepted
accounting principles in the U.S. (“GAAP”). Management believes that these measures provide useful information to our investors by distinguishing certain noncash events such as our valuation allowances release and write-down of our net
deferred tax assets and that these measures, when reconciled to net income attributable to IES, which is the most directly comparable GAAP measure, help our investors to better identify underlying trends in the operations of our business and
facilitate easier comparisons of our financial performance with prior and future periods and to our peers. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information calculated in accordance
with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures. A reconciliation of these non-GAAP financial measures to GAAP results has been provided in the
financial tables included in this document.
For further details on the Company’s financial results, please refer to the Company’s quarterly report on
Form 10-Q for the fiscal quarter ended March 31, 2018, to be filed with the Securities and Exchange Commission (“SEC”) by May 4, 2018, and any amendments thereto.
General information about IES Holdings, Inc. can be found at http://www.ies-co.com under “Investors.” The Company’s annual report on Form 10-K, quarterly reports on
Form 10-Q and current reports on Form 8-K, as well as any amendments to those reports, are available free of charge through the Company’s website as soon as reasonably practicable after they are filed with, or furnished to, the SEC.
IES Holdings, Inc. (NASDAQ: IESC)
Financial measures presented here are in millions, except for earnings per share or as otherwise noted
REVENUE OPERATING INCOME
$696 $811 $25.0
$20.3 $396 $404
$8.6 $7.1
2016 2017 3/31/17 3/31/18 2016 2017 3/31/17 3/31/18 Fiscal Year Six Months Ended Fiscal Year Six Months Ended
NET INCOME ATTRIBUTABLE TO IES BACKLOG
$120.8 Net income (loss) attributable to IES $343
Adjusted net income (loss)
$21.9 attributable to IES*
$16.8
$13.4
$7.1 $5.8 $335
$4.4
2016 2017 3/31/17 3/31/18
Fiscal Year Six Months Ended 3/31/17 3/31/18
($27.3)
* Adjusted net income attributable to IES is a non-GAAP financial measure; see supplemental disclosure for reconciliation table
Second Quarter 2018 Highlights
Revenue
– $205.7 million, an increase of 1.0% compared with the 2nd quarter of FY17
(“2Q17”)
Income from Operations
– $4.1 million, an increase of
$2.5 million compared with 2Q17
Earnings
– Net income attributable to
IES of $2.2 million, or $0.11 per diluted share, compared with net income of $0.5 million, or $0.02 per diluted share, for 2Q17
– Adjusted net income
attributable to IES (a non-GAAP financial measure; see supplemental disclosure table) of $3.4 million, or $0.16 per diluted share, compared with $1.1 million, or $0.05 per diluted share for 2Q17
Completed Acquisition
– Subsequent to the quarter end, Communications segment acquired
Azimuth Communications on April 6
Second Quarter 2018 Segment Results
Commercial & Industrial Revenue: $65.6 million, increase of 18.7% over 2Q17 Operating Loss: ($0.3) million Operating Margin: (0.5%)
Revenue: $50.2 million, decrease of 18.5% from 2Q17 Communications Operating Profit: $3.2 million Operating Margin: 6.3%
Infrastructure Solutions Revenue: $23.9 million, increase of 27.0% over 2Q17 Operating Profit: $0.3 million Operating Margin: 1.3%
Revenue: $66.0 million, decrease of 2.9% from 2Q17 Residential Operating Profit: $3.3 million Operating Margin: 4.9%
Quarterly Financials
$208 $207 $206 $206 $204 $198 $192
Revenue $180
6/30/16 9/30/16 12/31/16 3/31/17 6/30/17 9/30/17 12/31/17 3/31/18
$9.2
$8.2
$7.0 $7.0
$4.7
$4.1
$3.0
Operating Income $1.6
6/30/16 9/30/16 12/31/16 3/31/17 6/30/17 9/30/17 12/31/17 3/31/18
Backlog Of $343 Million As Of 3/31/18
$335 $331 $337 $343
Backlog $314 y Quarterl
3/31/17 6/30/17 9/30/17 12/31/17 3/31/18
Income Statement
(in millions, except earnings per share) Three Months Ended Six Months Ended March 31, March 31, 2017 2018 2017 2018 Revenue $203.7 $205.7 $395.8 $404.0
Income from operations (1) 1.6 4.1 8.6 7.1 Interest expense & other 0.4 0.4 0.8 0.8 Income from operations before income taxes $1.2 $3.7 $7.8 $6.4 Provision (benefit)
for income taxes 0.7 1.4 3.3 33.6 Net income attributable to noncontrolling interest - (0.1) (0.1) (0.1) Net income attributable to IES Holdings, Inc. $0.5 $2.2 $4.4 ($27.3)
Adjusted net income attributable to IES Holdings, Inc. (2) $1.1 $3.4 $7.1 $5.8
Earnings
per share attributable to IES Holdings, Inc. $0.02 $0.11 $0.22 $0.11 Diluted shares used to calculate earnings per share 21.6 21.4 21.6 21.4
(1)Includes results of
operations from two Commercial & Industrial branches that are winding down operations (2)Adjusted net income attributable to IES Holdings, Inc. is a non-GAAP financial measure; see reconciliation table
Select Balance Sheet Data
(in millions)
3/31/17 9/30/17 3/31/18 Cash $20.8 $28.3 $35.7 Current Assets 194.5 203.5 190.9
Deferred Tax Assets 90.3 86.2 50.9 Non-Current Assets 102.3 106.5 107.4 Total Assets $408.0 $424.5 $385.0
Current Liabilities $140.3 $150.6 $139.4 Other
Liabilities 7.4 4.5 4.6 Debt 29.4 29.4 29.6 Total Liabilities $177.1 $184.5 $173.6 Noncontrolling interest 1.7 3.3 3.3 Equity 229.2 236.7 208.1 Total Liabilities & Equity $408.0 $424.5 $385.0
Segment Results
(in millions) Three Months Ended Six Months Ended March 31, March 31, 2017 2018 2017 2018 Revenue Commercial & Industrial $55.3 $65.6 $109.2 $118.6
Communications 61.7 50.2 115.0 104.7 Infrastructure Solutions 18.8 23.9 37.3 45.6 Residential 67.9 66.0 134.4 135.1 Total Revenue $203.7 $205.7 $395.8 $404.0
Operating Income
Commercial & Industrial ($2.6) ($0.3) ($0.8) ($1.3)
Communications 3.2 3.2 5.4 6.2 Infrastructure Solutions - 0.3 1.3 0.4 Residential 4.6 3.3 9.8 7.3 Corporate (3.6) (2.3) (7.1) (5.6) Total Operating Income $1.6 $4.1 $8.6 $7.1
Commercial & Industrial Wind-Down Branches Results
The following table presents the operating losses of the Commercial & Industrial Wind-Down Branches for the current and prior year quarter
(in millions) Three Months Ended Six Months Ended March 31, March 31, 2017 2018 2017 2018 Revenues $9.4 $3.9 $19.8 $7.1 Cost of Service 11.9 4.0 22.1 7.3 Gross
Profit ($2.5) ($0.0) ($2.3) ($0.2) Selling, general and administrative expenses 0.8 0.5 1.5 0.9 Loss from continuing operations ($3.3) ($0.5) ($3.7) ($1.1)
`Non-GAAP Reconciliation Of Adjusted Net Income Attributable To
IES Holdings, Inc.
(in millions, except earnings per share) Three Months Ended Six Months Ended March 31, March 31, 2017 2018 2017 2018 Net income
(loss) attributable to IES Holdings, Inc. $0.5 $2.2 $4.4 ($27.3) Provision for income taxes 0.7 1.4 3.3 33.6 Adjusted net income before taxes $1.2 $3.6 $7.7 $6.2 Current tax expense (1) (0.1) (0.3) (0.6) (0.4) Adjusted net income attributable
to IES Holdings, Inc. (2) $1.1 $3.4 $7.1 $5.8
Adjusted earnings per share attributable to IES Holdings, Inc. (2) $0.05 $0.16 $0.33 $0.27
Diluted shares used to calculate adjusted earnings per share 21.6 21.4 21.6 21.2
(1)
Represents the tax expense for the current period which will be paid in cash, and not offset by the utilization of deferred tax assets (2) Adjusted net income attributable to IES Holdings, Inc. And Adjusted earnings per share attributable to
IES Holdings, Inc. are non-GAAP financial measures
NOL Summary
Estimated net operating loss carry forwards (“NOLs”) of approximately $378 million as of September 30, 2017, including $142 million associated with amortization of
personal goodwill Rights Agreement implemented to deter new 5% shareholders in order to prevent certain limitations on NOLs
NOL EXPIRATION SCHEDULE
$138
$65
$43 $44
$24 $37 $16
$5 $4 $3
Note: Assumes no change, limitation or usage of existing NOLs prior to expiration
dates