SEC Filing | IES Holdings, Inc.

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iesc-20230331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


FORM			10-Q


(Mark One)
☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended		March 31, 2023
	OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to


Commission file number			001-13783

IES Holdings, Inc.

(Exact name of registrant as specified in its charter)


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

2 Riverway, Suite 1730, Houston, Texas 77056

(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code: (713) 860-1500

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, par value $0.01 per share

IESC

NASDAQ Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☑

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

On May 5, 2023, there were 20,171,287 shares of common stock outstanding.

IES HOLDINGS, INC. AND SUBSIDIARIES

INDEX



			Page
PART I. FINANCIAL INFORMATION
	Item 1. Financial Statements
		Condensed Consolidated Balance Sheets as of March 31, 202 3 and September 30, 2022	6
		Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended Ma r ch 31, 202 3 and 20 2 2	7
		Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended March 31, 202 3 and 2 02 2	9
		Condensed Consolidated Statements of Cash Flows for the Six Months Ended March 31, 202 3 and 20 2 2	10
		Notes to Condensed Consolidated Financial Statements	11
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		24
	Item 3. Quantitative and Qualitative Disclosures About Market Risk		35
	Item 4. Controls and Procedures		35
PART II. OTHER INFORMATION
	Item 1. Legal Proceedings		36
	Item 1A. Risk Factors		36
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		36
	Item 3. Defaults Upon Senior Securities		36
	Item 4. Mine Safety Disclosures		36
	Item 5. Other Information		36
	Item 6. Exhibits		37
	Signatures		38

PART I. FINANCIAL INFORMATION

DEFINITIONS

In this Quarterly Report on Form 10-Q, the words “IES”, the “Company”, the “Registrant”, “we”, “our”, “ours” and “us” refer to IES Holdings, Inc. and, except as otherwise specified herein, to our subsidiaries.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes certain statements that may be deemed “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, all of which are based upon various estimates and assumptions that the Company believes to be reasonable as of the date hereof. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “could,” “should,” “expect,” “plan,” “project,” “intend,” “anticipate,” “believe,” “seek,” “estimate,” “predict,” “potential,” “pursue,” “target,” “continue,” the negative of such terms or other comparable terminology. These statements involve risks and uncertainties that could cause the Company’s actual future outcomes to differ materially from those set forth in such statements. Such risks and uncertainties include, but are not limited to:

•a general reduction in the demand for our products or services;

•changes in general economic conditions, including market and macro-economic disruptions resulting from 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 coronavirus disease ("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;

•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;

•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 as a result of 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 service our debt;

•difficulty in fulfilling the covenant terms of our revolving credit facility, including liquidity, and other financial requirements, which could result in a default and acceleration of any indebtedness under such revolving credit facility;

•uncertainties inherent in estimating future operating results, including revenues, operating income or cash flow;

•the recognition of potential goodwill, long-lived assets and other investment impairments;

•the existence of a controlling shareholder, who has the ability to take action not aligned with other shareholders or to dispose of all or any portion of the shares of our common stock it holds, which could trigger certain change of control provisions in a number of our material agreements, including our financing and surety arrangements and our executive severance plan;

•the relatively low trading volume of our common stock, which may make it difficult for shareholders to sell a substantial number of shares for the same price at which shareholders could sell a smaller number of shares;

•the possibility that we issue additional shares of common stock, preferred stock or convertible securities that will dilute the percentage ownership interest of existing stockholders and may dilute the value per share of our common stock;

•the potential for substantial sales of our common stock, which could adversely affect our stock price;

•the impact of increasing scrutiny and changing expectations from investors and customers, or new or changing regulations, with respect to environmental, social and governance practices;

•the cost or effort required for our shareholders to bring certain claims or actions against us, resulting from our designation of the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings;

•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

IES HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In Thousands, Except Share Information)


			March 31,		September 30,
			2023		2022
			(Unaudited)
ASSETS
CURRENT ASSETS:
	Cash and cash equivalents		$	15,129	$	24,848

	Accounts receivable:
		Trade, net of allowance of $3,757 and $5,361, respectively	330,643		370,726
		Retainage	73,965		65,065
	Inventories		106,311		96,333
	Costs and estimated earnings in excess of billings		47,956		52,076
	Prepaid expenses and other current assets		17,930		15,350
Total current assets			591,934		624,398
Property and equipment, net			55,073		54,426
Goodwill			92,395		92,395
Intangible assets, net			63,592		71,936
Deferred tax assets			15,438		20,519
Operating right of use assets			54,206		55,890
Other non-current assets			16,450		15,145
Total assets			$	889,088	$	934,709
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
	Accounts payable and accrued expenses		278,138		316,950
	Billings in excess of costs and estimated earnings		94,829		84,936
Total current liabilities			372,967		401,886
Long-term debt			14,173		81,628
Operating long-term lease liabilities			36,684		38,144
Other non-current liabilities			30,920		22,570
Total liabilities			454,744		544,228
Noncontrolling interest			36,593		29,193
STOCKHOLDERS’ EQUITY:
	Preferred stock, $0.01 par value, 10,000,000 shares authorized, none issued
		and outstanding	—		—
	Common stock, $0.01 par value, 100,000,000 shares authorized; 22,049,529
		issued and 20,171,521 and 20,341,900 outstanding, respectively	220		220
	Treasury stock, at cost, 1,878,008 and 1,707,629 shares, respectively		(49,751)		(44,000)
	Additional paid-in capital		201,958		201,871
	Retained earnings		245,324		203,197
Total stockholders’ equity			397,751		361,288
Total liabilities and stockholders’ equity			$	889,088	$	934,709

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

IES HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

(In Thousands, Except Share Information)

(Unaudited)


		Three Months Ended March 31,
		2023		2022
Revenues		$	568,881	$	501,593
Cost of services		467,955		443,086
	Gross profit	100,926		58,507
Selling, general and administrative expenses		69,349		63,430
Contingent consideration		69		69
Gain on sale of assets		(102)		(68)
	Operating income (loss)	31,610		(4,924)
Interest and other (income) expense:
Interest expense		1,049		543
Other income, net		(1,768)		(124)

Income (loss) from operations before income taxes		32,329		(5,343)
Provision for (benefit from) income taxes		8,157		(1,293)
Net income (loss)		24,172		(4,050)
Net income attributable to noncontrolling interest		(2,621)		(1,362)
Comprehensive income (loss) attributable to IES Holdings, Inc.		$	21,551	$	(5,412)

Earnings (loss) per share attributable to common stockholders of IES Holdings, Inc.:
	Basic	$	0.93	$	(0.30)
	Diluted	$	0.92	$	(0.30)

Shares used in the computation of earnings (loss) per share:
	Basic	20,170,824		20,772,426
	Diluted	20,387,796		20,772,426

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

IES HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

(In Thousands, Except Share Information)

(Unaudited)


		Six Months Ended March 31,
		2023		2022
Revenues		$	1,143,755	$	982,102
Cost of services		947,391		843,868
	Gross profit	196,364		138,234
Selling, general and administrative expenses		137,117		122,832
Contingent consideration		138		138
Gain on sale of assets		(13,162)		(73)
	Operating income	72,271		15,337
Interest and other (income) expense:
Interest expense		2,233		979
Other (income) expense, net		(1,073)		641

Income from operations before income taxes		71,111		13,717
Provision for income taxes		18,185		2,688
Net income		52,926		11,029
Net income attributable to noncontrolling interest		(4,973)		(1,977)
Comprehensive income attributable to IES Holdings, Inc.		$	47,953	$	9,052

Earnings per share attributable to common stockholders of IES Holdings, Inc.:
	Basic	$	2.08	$	0.39
	Diluted	$	2.06	$	0.38

Shares used in the computation of earnings per share:
	Basic	20,206,814		20,737,253
	Diluted	20,414,492		21,139,429

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

IES HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity (unaudited)

(In Thousands, Except Share Information)


		Three Months Ended March 31, 2023
		Common Stock			Treasury Stock					Retained Earnings		Total Stockholders' Equity
		Shares	Amount		Shares	Amount		Additional Paid-In Capital
BALANCE, December 31, 2022		22,049,529	$	220	(1,875,676)	$	(49,653)	$	200,940	$	226,544	$	378,051

	Acquisition of treasury stock	—		—	(4,332)		(151)		3		—		(148)
	Option exercised	—		—	2,000		53		(39)		—		14
	Non-cash compensation	—		—	—		—		1,054		—		1,054
	Increase in noncontrolling interest	—		—	—		—		—		(2,771)		(2,771)

	Net income attributable to IES Holdings, Inc.	—		—	—		—		—		21,551		21,551
BALANCE, March 31, 2023		22,049,529	$	220	(1,878,008)	$	(49,751)	$	201,958	$	245,324	$	397,751


		Three Months Ended March 31, 2022
		Common Stock			Treasury Stock					Retained Earnings		Total Stockholders' Equity
		Shares	Amount		Shares	Amount		Additional Paid -In Capital
BALANCE, December 31, 2021		22,049,529	$	220	(1,261,444)	$	(30,460)	$	199,162	$	187,538	$	356,460

	Acquisition of treasury stock	—		—	(2,587)		(127)		—		—		(127)

	Non-cash compensation	—		—	—		—		997		—		997
	Increase in noncontrolling interest	—		—	—		—		—		(870)		(870)

	Net loss attributable to IES Holdings, Inc.	—		—	—		—		—		(5,412)		(5,412)
BALANCE, March 31, 2022		22,049,529	$	220	(1,264,031)	$	(30,587)	$	200,159	$	181,256	$	351,048


		Six Months Ended March 31, 2023
		Common Stock			Treasury Stock					Retained Earnings		Total Stockholders' Equity
		Shares	Amount		Shares	Amount		Additional Paid -In Capital
BALANCE, September 30, 2022		22,049,529	$	220	(1,707,629)	$	(44,000)	$	201,871	$	203,197	$	361,288
	Issuances under compensation plans	—		—	71,013		1,843		(1,843)		—		—
	Acquisition of treasury stock	—		—	(243,392)		(7,647)		10		—		(7,637)
	Options exercised	—		—	2,000		53		(39)		—		14
	Non-cash compensation	—		—	—		—		1,959		—		1,959
	Increase in noncontrolling interest	—		—	—		—		—		(5,826)		(5,826)
	Net income attributable to IES Holdings, Inc.	—		—	—		—		—		47,953		47,953
BALANCE, March 31, 2023		22,049,529	$	220	(1,878,008)	$	(49,751)	$	201,958	$	245,324	$	397,751


		Six Months Ended March 31, 2022
		Common Stock			Treasury Stock					Retained Earnings		Total Stockholders' Equity
		Shares	Amount		Shares	Amount		Additional Paid -In Capital
BALANCE, September 30, 2021		22,049,529	$	220	(1,316,998)	$	(29,300)	$	201,899	$	173,134	$	345,953
	Issuances under compensation plans	—		—	157,167		3,638		(3,638)		—		—
	Acquisition of treasury stock	—		—	(104,200)		(4,925)		—		—		(4,925)
	Non-cash compensation	—		—	—		—		1,898		—		1,898
	Increase in noncontrolling interest	—		—	—		—		—		(930)		(930)

	Net income attributable to IES Holdings, Inc.	—		—	—		—		—		9,052		9,052
BALANCE, March 31, 2022		22,049,529	$	220	(1,264,031)	$	(30,587)	$	200,159	$	181,256	$	351,048

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

IES HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In Thousands)

(Unaudited)


			Six Months Ended March 31,
			2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income		$	52,926	$	11,029
	Adjustments to reconcile net income to net cash provided by (used in) operating activities:
		Bad debt expense		330		92
		Deferred financing cost amortization		132		88
		Depreciation and amortization		13,252		12,370
		Gain on sale of assets		(13,162)		(73)

		Non-cash compensation expense		1,956		1,898
		Deferred income tax expense		6,955		1,931
	Changes in operating assets and liabilities:
		Accounts receivable		35,660		(22,830)
		Inventories		(11,798)		(17,325)
		Costs and estimated earnings in excess of billings		4,120		(12,128)
		Prepaid expenses and other current assets		(11,672)		(3,795)
		Other non-current assets		1,728		(1,968)
		Accounts payable and accrued expenses		(30,454)		26,911
		Billings in excess of costs and estimated earnings		10,109		1,134
		Other non-current liabilities		(23)		(242)
Net cash provided by (used in) operating activities				60,059		(2,908)
CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchases of property and equipment			(6,677)		(21,627)
	Proceeds from sale of assets			19,124		199
	Cash paid in conjunction with equity investments			(165)		(500)


Net cash provided by (used in) investing activities				12,282		(21,928)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Borrowings of debt			1,162,971		872,609
	Repayments of debt			(1,230,519)		(842,727)
	Cash paid for finance leases			(1,617)		(603)

	Distribution to noncontrolling interest			(5,272)		(3,344)
	Purchase of treasury stock			(7,637)		(4,925)
	Options exercised			14		—
Net cash provided by (used in) financing activities				(82,060)		21,010
NET DECREASE IN CASH AND CASH EQUIVALENTS				(9,719)		(3,826)
CASH AND CASH EQUIVALENTS, beginning of period				24,848		23,105
CASH AND CASH EQUIVALENTS, end of period			$	15,129	$	19,279

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
		Cash paid for interest	$	1,765	$	949
		Cash paid for income taxes (net)	$	4,660	$	2,142

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

IES HOLDINGS, INC.

Notes to the Condensed Consolidated Financial Statements

(All Amounts in Thousands Except Share Amounts)

(Unaudited)

1. BUSINESS AND ACCOUNTING POLICIES

Description of the Business

IES Holdings, Inc. designs and installs integrated electrical and technology systems and provides infrastructure products and services to a variety of end markets, including data centers, residential housing and commercial and industrial facilities. Our operations are organized into four business segments, based upon the nature of our services:

•Communications – Nationwide provider of technology infrastructure services, including the design, build, and maintenance of the communications infrastructure within data centers for co-location and managed hosting customers, for both large corporations and independent businesses.

•Residential – Regional provider of electrical installation services for single-family housing and multi-family apartment complexes, as well as heating, ventilation and air conditioning (HVAC) and plumbing installation services in certain markets.

•Infrastructure Solutions – Provider of electro-mechanical solutions for industrial operations, including apparatus repair and custom-engineered products such as generator enclosures used in data centers and other industrial applications.

•Commercial & Industrial – Provider of electrical and mechanical design, construction, and maintenance services to the commercial and industrial markets in various regional markets and nationwide in certain areas of expertise, such as the power infrastructure market and data centers.

The words “IES”, the “Company”, “we”, “our”, and “us” refer to IES Holdings, Inc. and, except as otherwise specified herein, to our consolidated subsidiaries.

Seasonality and Quarterly Fluctuations

Results of operations from our Residential segment can be seasonal, depending on weather trends, with typically higher revenues generated during spring and summer and lower revenues generated during fall and winter. The Commercial & Industrial, Communications and Infrastructure Solutions segments of our business are less subject to seasonal trends, as work in these segments generally is performed inside structures protected from the weather, although weather can still impact these businesses, especially in the early stages of projects. From quarter to quarter, results for our Communications, Residential, and Commercial & Industrial segments may be materially affected by the timing of new construction projects, and our volume of business may be adversely affected by declines in construction projects resulting from adverse regional or national economic conditions. Quarterly results for our Infrastructure Solutions segment may be affected by the timing of outages or capital projects at our customers’ facilities. Accordingly, operating results for any fiscal period are not necessarily indicative of results that may be achieved for any subsequent fiscal period.

Basis of Financial Statement Preparation

The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of IES, our wholly-owned subsidiaries, and entities that we control due to ownership of a majority of voting interest and have been prepared in accordance with the instructions to interim financial reporting as prescribed by the United States Securities and Exchange Commission (the “SEC”). The results for the interim periods are not necessarily indicative of results for the entire year. These interim financial statements do not include all disclosures required by U.S. generally accepted accounting principles (“GAAP”) and should be read in conjunction with the consolidated financial statements and notes thereto filed with the SEC in our Annual Report on Form 10-K for the fiscal year ended September 30, 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 March 31, 2023 had been redeemable at that date, the redemption amount would have been $36,593.

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 8 - Fair Value Measurements for further information.

2. CONTROLLING STOCKHOLDER

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 May 5, 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.

3. REVENUE RECOGNITION

Contracts

Our revenue is derived from contracts with customers, and we determine the appropriate accounting treatment for each contract at its inception. Our contracts primarily relate to electrical and mechanical contracting services, technology infrastructure products and services, and electro-mechanical solutions for industrial operations. Revenue is earned based upon an agreed fixed price or actual costs incurred plus an agreed upon percentage.

We account for a contract when: (i) it has approval and commitment from both parties, (ii) the rights of the parties are identified, (iii) payment terms are identified, (iv) the contract has commercial substance, and (v) collectability of consideration is probable. We consider the start of a project to be when the above criteria have been met and we have written authorization from the customer to proceed.

Performance Obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.

We recognize revenue over time for the majority of the services we perform 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 and six months ended March 31, 2023 and 2022 was derived from the following activities. See details in the following tables:


	Three Months Ended March 31,				Six Months Ended March 31,
	2023		2022			2023		2022
Communications	$	141,120	$	130,639		$	288,365	$	258,028
Residential
Single-family	211,426		192,368			438,254		365,896
Multi-family and Other	94,686		68,038			185,936		136,286
Total Residential	306,112		260,406			624,190		502,182
Infrastructure Solutions
Industrial Services	11,562		15,837			22,516		30,653
Custom Power Solutions	41,054		25,896			79,384		53,176
Total Infrastructure Solutions	52,616		41,733			101,900		83,829
Commercial & Industrial	69,033		68,815			$	129,300	$	138,063
Total Revenue	$	568,881	$	501,593		$	1,143,755	$	982,102


	Three Months Ended March 31, 2023
		Communications		Residential		Infrastructure Solutions		Commercial & Industrial		Total
Fixed-price		$	92,392	$	306,112	$	50,951	$	62,954	$	512,409
Time-and-material			48,728		—		1,665		6,079		56,472
Total revenue		$	141,120	$	306,112	$	52,616	$	69,033	$	568,881

	Three Months Ended March 31, 2022
		Communications		Residential		Infrastructure Solutions		Commercial & Industrial		Total
Fixed-price		$	85,722	$	260,406	$	39,924	$	64,346	$	450,398
Time-and-material			44,917		—		1,809		4,469		51,195
Total revenue		$	130,639	$	260,406	$	41,733	$	68,815	$	501,593













	Six Months Ended March 31, 2023
		Communications		Residential		Infrastructure Solutions		Commercial & Industrial		Total
Fixed-price		$	179,666	$	624,190	$	98,497	$	117,551	$	1,019,904
Time-and-material			108,699		—		3,403		11,749		123,851
Total revenue		$	288,365	$	624,190	$	101,900	$	129,300	$	1,143,755

	Six Months Ended March 31, 2022
		Communications		Residential		Infrastructure Solutions		Commercial & Industrial		Total
Fixed-price		$	174,144	$	502,182	$	80,377	$	129,206	$	885,909
Time-and-material			83,884		—		3,452		8,857		96,193
Total revenue		$	258,028	$	502,182	$	83,829	$	138,063	$	982,102

Accounts Receivable and Allowance for Credit Losses

Accounts receivable include amounts that we have billed or have an unconditional right to bill our customers. As of March 31, 2023, Accounts receivable included $11,608 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 six months ended March 31, 2023 and 2022, we recognized revenue of $52,350 and $45,115 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 March 31, 2023, we had remaining performance obligations of $1,012,111. The Company expects to recognize revenue on approximately $833,212 of the remaining performance obligations over the next 12 months, with the remainder recognized thereafter.

For the three and six months ended March 31, 2023, net revenue recognized from our performance obligations satisfied in previous periods was not material.

4. DEBT

We are a party to the Third Amended and Restated Credit and Security Agreement (the "Amended Credit Agreement"), which provides for a maximum borrowing amount of $150,000 under our revolving credit facility. The Amended Credit Agreement, which matures on September 30, 2026, contains customary affirmative, negative and financial covenants as disclosed in Item 7 of our Annual Report on Form 10-K for the fiscal year ended September 30, 2022. As of March 31, 2023, the Company was in compliance with the financial covenants under the Amended Credit Agreement.

At March 31, 2023 and September 30, 2022, we had $15,111 and $82,659, respectively, in borrowings outstanding under our revolving credit facility. At March 31, 2023, we also had $4,366 in outstanding letters of credit and total availability of $127,834 under our revolving credit facility without triggering the financial covenants under the Amended Credit Facility.

5. PER SHARE INFORMATION

The following tables reconcile the components of basic and diluted earnings (loss) per share for the three and six months ended March 31, 2023 and 2022:


	Three Months Ended March 31,
	2023		2022
Numerator:
Net income (loss) attributable to IES Holdings, Inc.	$	21,551	$	(5,412)
Increase in noncontrolling interest		(2,771)		(870)
Net income attributable to restricted stockholders of IES Holdings, Inc.		—		—
Net income (loss) attributable to common stockholders of IES Holdings, Inc.	$	18,780	$	(6,282)

Denominator:
Weighted average common shares outstanding — basic		20,170,824		20,772,426
Effect of dilutive stock options and non-vested securities		216,972		—
Weighted average common and common equivalent shares outstanding — diluted		20,387,796		20,772,426

Earnings (loss) per share attributable to common stockholders of IES Holdings, Inc.:
Basic	$	0.93	$	(0.30)
Diluted	$	0.92	$	(0.30)


	Six Months Ended March 31,
	2023		2022
Numerator:
Net income attributable to IES Holdings, Inc.	$	47,953	$	9,052
Increase in noncontrolling interest		(5,826)		(930)
Net income attributable to restricted stockholders of IES Holdings, Inc.		(10)		(6)
Net income attributable to common stockholders of IES Holdings, Inc.	$	42,117	$	8,116

Denominator:
Weighted average common shares outstanding — basic		20,206,814		20,737,253
Effect of dilutive stock options and non-vested securities		207,678		402,176
Weighted average common and common equivalent shares outstanding — diluted		20,414,492		21,139,429

Earnings per share attributable to common stockholders of IES Holdings, Inc.:
Basic	$	2.08	$	0.39
Diluted	$	2.06	$	0.38

For the three and six months ended March 31, 2023 and the six months ended March 31, 2022, 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 were included in the computation of diluted earnings per share. For the three months ended March 31, 2023 and the six months ended March 31, 2022, all potentially dilutive unvested performance awards were included in the calculation of diluted earnings per share. For the six months ended March 31, 2023, the computation of diluted earnings per share excluded certain unvested performance awards as the inclusion of such instruments would have been anti-dilutive. For the three months ended March 31, 2022, the computation of diluted loss per share excluded our outstanding stock options and unvested performance awards as the inclusion of such instruments would have had an anti-dilutive impact on the Company's loss per share.

6. OPERATING SEGMENTS

We manage and measure performance of our business in four distinct operating segments: Communications, Residential, Infrastructure Solutions, and Commercial & Industrial. These segments are reflective of how the Company’s Chief Operating Decision Maker (“CODM”) reviews operating results for the purpose of allocating resources and assessing performance. The Company’s CODM is its Chief Executive Officer.

Transactions between segments, if any, are eliminated in consolidation. Our corporate organization provides general and administrative services, as well as support services, to each of our four operating segments. Management allocates certain shared costs among segments for selling, general and administrative expenses and depreciation expense.

Segment information for the three and six months ended March 31, 2023 and 2022 is as follows:


		Three Months Ended March 31, 2023
		Communications		Residential		Infrastructure Solutions		Commercial & Industrial		Corporate		Total
Revenues		$	141,120	$	306,112	$	52,616	$	69,033	$	—	$	568,881
Cost of services		115,957		251,281		38,421		62,296		—		467,955
Gross profit		25,163		54,831		14,195		6,737		—		100,926
Selling, general and administrative		13,386		37,999		5,990		6,400		5,574		69,349
Contingent consideration		—		69		—		—		—		69
Gain on sale of assets		(3)		—		—		(99)		—		(102)
Operating income (loss)		$	11,780	$	16,763	$	8,205	$	436	$	(5,574)	$	31,610
Other data:
	Depreciation and amortization expense	$	502	$	4,557	$	1,326	$	412	$	67	$	6,864
	Capital expenditures	$	480	$	2,379	$	560	$	546	$	—	$	3,965
	Total assets	$	188,937	$	389,946	$	173,621	$	87,721	$	48,863	$	889,088


		Three Months Ended March 31, 2022
		Communications		Residential		Infrastructure Solutions		Commercial & Industrial		Corporate		Total
Revenues		$	130,639	$	260,406	$	41,733	$	68,815	$	—	$	501,593
Cost of services		119,518		214,862		34,672		74,034		—		443,086
Gross profit (loss)		11,121		45,544		7,061		(5,219)		—		58,507
Selling, general and administrative		10,978		33,576		6,391		8,448		4,037		63,430
Contingent consideration		—		69		—		—		—		69
Gain on sale of assets		(7)		—		(28)		(33)		—		(68)
Operating income (loss)		$	150	$	11,899	$	698	$	(13,634)	$	(4,037)	$	(4,924)
Other data:
	Depreciation and amortization expense	$	362	$	3,721	$	1,385	$	647	$	41	$	6,156
	Capital expenditures	$	750	$	6,707	$	823	$	840	$	168	$	9,288
	Total assets	$	171,929	$	363,921	$	150,276	$	99,262	$	45,851	$	831,239


		Six Months Ended March 31, 2023
		Communications		Residential		Infrastructure Solutions		Commercial & Industrial		Corporate		Total
Revenues		$	288,365	$	624,190	$	101,900	$	129,300	$	—	$	1,143,755
Cost of services		241,464		509,740		77,238		118,949		—		947,391
Gross profit		46,901		114,450		24,662		10,351		—		196,364
Selling, general and administrative		25,683		77,050		11,751		12,089		10,544		137,117
Contingent consideration		—		138		—		—		—		138
Gain on sale of assets		(3)		(6)		(19)		(13,134)		—		(13,162)
Operating income (loss)		$	21,221	$	37,268	$	12,930	$	11,396	$	(10,544)	$	72,271
Other data:
	Depreciation and amortization expense	$	932	$	8,701	$	2,680	$	804	$	135	$	13,252
	Capital expenditures	$	1,122	$	3,087	$	1,199	$	1,269	$	—	$	6,677
	Total assets	$	188,937	$	389,946	$	173,621	$	87,721	$	48,863	$	889,088


		Six Months Ended March 31, 2022
		Communications		Residential		Infrastructure Solutions		Commercial & Industrial		Corporate		Total
Revenues		$	258,028	$	502,182	$	83,829	$	138,063	$	—	$	982,102
Cost of services		226,408		414,000		69,048		134,412		—		843,868
Gross profit		31,620		88,182		14,781		3,651		—		138,234
Selling, general and administrative		22,363		64,571		12,449		15,716		7,733		122,832
Contingent consideration		—		138		—		—		—		138
Loss (gain) on sale of assets		(13)		8		(28)		(40)		—		(73)
Operating income (loss)		$	9,270	$	23,465	$	2,360	$	(12,025)	$	(7,733)	$	15,337
Other data:
	Depreciation and amortization expense	$	721	$	7,573	$	2,728	$	1,277	$	71	$	12,370
	Capital expenditures	$	1,344	$	7,891	$	11,139	$	1,085	$	168	$	21,627
	Total assets	$	171,929	$	363,921	$	150,276	$	99,262	$	45,851	$	831,239

7. STOCKHOLDERS’ EQUITY

Equity Incentive Plan

The Company’s 2006 Equity Incentive Plan, as amended and restated (the “Equity Incentive Plan”), provides for grants of stock options as well as grants of stock, including restricted stock. Approximately 3.0 million shares of common stock are authorized for issuance under the Equity Incentive Plan, of which approximately 608,610 shares were available for issuance at March 31, 2023.

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 4,048 and 223,779 shares, respectively, of our common stock during the three and six months ended March 31, 2023 in open market transactions at an average price of $34.97 and $31.05, respectively, per share. During the three and six months ended March 31, 2022, we repurchased 2,587 and 59,002 shares, respectively, of our common stock in open market transactions at an average price of $49.00 and $46.81, respectively, per share.

Treasury Stock

During the six months ended March 31, 2023, we issued 71,013 shares of common stock from treasury stock to employees and repurchased 19,347 shares of common stock from our employees to satisfy statutory tax withholding requirements upon the vesting of certain performance phantom stock units under the Equity Incentive Plan. In addition, 266 restricted shares were forfeited and returned to treasury stock. During the six months ended March 31, 2023, we issued 2,000 unrestricted shares to satisfy the exercise of outstanding options.

During the six months ended March 31, 2022, 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 six months ended March 31, 2023. Of the awards previously granted, 13,373 shares vested and 266 shares were forfeited. We did not recognize any compensation expense related to restricted stock awards during the three months ended March 31, 2023, and during the three months ended March 31, 2022 we recognized $36 in compensation expense related to restricted stock awards. During the six months ended March 31, 2023 and 2022, we recognized $25 and $71, respectively, in compensation expense related to restricted stock awards. At March 31, 2023, 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. We recognized compensation expense related to these grants of $94 and $96 during the three months ended March 31, 2023 and 2022, respectively, and $190 and $193 during the six months ended March 31, 2023 and 2022, respectively.

Employee Phantom Stock Units

An employee phantom stock unit (an “Employee PSU”) is a contractual right to receive one share of the Company’s common stock. Depending on the terms of each grant, Employee PSUs may vest upon the achievement of certain specified performance objectives and continued performance of services, or may vest based on continued performance of services through the vesting date.

As of March 31, 2023, the Company had outstanding Employee PSUs, which, subject to the achievement of certain performance metrics, could result in the issuance of 362,802 shares of common stock. During the six months ended March 31, 2023, we granted 130,739 Employee PSUs, 12,885 were forfeited, and 71,013 vested. During the three months ended March 31, 2023 and 2022, we recognized $958 and $864, respectively, in compensation expense related to Employee PSU grants. During the six months ended March 31, 2023 and 2022, we recognized $1,740 and $1,632, respectively, in compensation expense related to Employee PSU grants.

8. FAIR VALUE MEASUREMENTS

Fair Value Measurement Accounting

Fair value is considered the price to sell an asset, or transfer a liability, between market participants on the measurement date. Fair value measurements assume that (1) the asset or liability is exchanged in an orderly manner, (2) the exchange is in the principal market for that asset or liability, and (3) the market participants are independent, knowledgeable, and able and willing to transact an exchange. Fair value accounting and reporting establishes a framework for measuring fair value by creating a hierarchy for observable independent market inputs and unobservable market assumptions and expands disclosures about fair value measurements. Judgment is required to interpret the market data used to develop fair value estimates. As such, the estimates presented herein are not necessarily indicative of the amounts that could be realized in a current exchange. The use of different market assumptions and/or estimation methods could have a material effect on the estimated fair value.

At March 31, 2023, 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 March 31, 2023 and September 30, 2022, are summarized in the following tables by the type of inputs applicable to the fair value measurements:


	March 31, 2023
			Total Fair Value		Quoted Prices (Level 1)		Significant Unobservable Inputs (Level 3)
Executive savings plan assets		$	783	$	783	$	—
Equity securities			288		288		—
Executive savings plan liabilities			(658)		(658)		—
Contingent consideration liability			(4,394)		—		(4,394)
Total		$	(3,981)	$	413	$	(4,394)


	September 30, 2022
			Total Fair Value		Quoted Prices (Level 1)		Significant Unobservable Inputs (Level 3)
Executive savings plan assets		$	706	$	706	$	—
Equity securities			1,937		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 March 31, 2023, we estimated the fair value of this contingent consideration liability at $4,394. 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		(71)
Fair value at March 31, 2023	$	(4,394)

9. INVENTORY

Inventories consist of the following components:


	March 31,		September 30,
	2023		2022
Raw materials	$	13,356	$	12,504
Work in process		11,795		8,218
Finished goods		2,325		2,129
Parts and supplies		78,835		73,482
Total inventories	$	106,311	$	96,333

10. GOODWILL AND INTANGIBLE ASSETS

Goodwill

The following summarizes the carrying value of goodwill by segment at March 31, 2023, which was unchanged from September 30, 2022:


	Communications		Residential		Infrastructure Solutions		Commercial & Industrial		Total




Goodwill at March 31, 2023	$	2,816	$	51,370	$	38,209	$	—	$	92,395

Intangible Assets

Intangible assets consist of the following:


	Estimated Useful Lives (in Years)			March 31, 2023
					Gross Carrying Amount		Accumulated Amortization		Net
Trademarks/trade names	5	-	20		$	14,621	$	(5,014)		$	9,607
Technical library	20				400		(191)			209
Customer relationships	6	-	15		91,426		(37,653)			53,773
Non-competition arrangements	5				40		(37)			3
Backlog and construction contracts	1				4,958		(4,958)			—
Total intangible assets					$	111,445	$	(47,853)		$	63,592


	Estimated Useful Lives (in Years)			September 30, 2022
					Gross Carrying Amount		Accumulated Amortization		Net
Trademarks/trade names	5	-	20		$	15,262	$	(4,589)		$	10,673
Technical library	20				400		(181)			219
Customer relationships	6	-	15		96,699		(35,662)			61,037
Non-competition arrangements	5				40		(33)			7
Backlog and construction contracts	1				4,958		(4,958)			—
Total intangible assets					$	117,359	$	(45,423)		$	71,936

11. COMMITMENTS AND CONTINGENCIES

Legal Matters

From time to time, we are a party to various claims, lawsuits and other legal proceedings that arise in the ordinary course of business. We maintain various insurance coverages to minimize financial risk associated with these proceedings. None of these proceedings, separately or in the aggregate, are expected to have a material adverse effect on our financial position, results of operations or cash flows. With respect to all such proceedings, we record reserves when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. We expense routine legal costs related to these proceedings as they are incurred.

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 six months ended March 31, 2023, 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 March 31, 2023, the remaining book value of receivables and retainage related to these contractual disputes, net of associated reserves, was $1,893.

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 March 31, 2023 and September 30, 2022, we had $7,632 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 March 31, 2023 and September 30, 2022, $4,166 and $3,878, respectively, of our outstanding letters of credit was utilized to collateralize our insurance program.

Surety

As of March 31, 2023, the estimated cost to complete our bonded projects was approximately $129,521. 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.

12. LEASES

We enter into various contractual arrangements for the right to use facilities, vehicles and equipment. The lease terms generally range from two to ten years for facilities and three to five years for vehicles and equipment. Our lease terms may include the exercise of renewal or termination options when it is reasonably certain these options will be exercised. Our lease agreements do not contain any material residual value guarantees or restrictive covenants.

Current operating and finance lease liabilities of $17,227 and $4,040, respectively, as of March 31, 2023, 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 March 31, 2023 are as follows:


	Operating Leases		Finance Leases		Total
Remainder of 2023	$	13,524	$	3,169	$	16,693
2024	15,081		4,180		19,261
2025	11,570		3,832		15,402
2026	8,064		2,659		10,723
2027	4,742		982		5,724
Thereafter	7,290		10		7,300
Total undiscounted lease payments	$	60,271	$	14,832	$	75,103
Less: imputed interest	6,360		1,751		8,111
Present value of lease liabilities	$	53,911	$	13,081	$	66,992

The total future undiscounted cash flows related to lease agreements committed to but not yet commenced as of March 31, 2023 is $4,704.

Lease cost recognized in our Condensed Consolidated Statements of Comprehensive Income is summarized as follows:


	Three Months Ended						Six Months Ended
	March 31, 2023		March 31, 2022				March 31, 2023		March 31, 2022
Operating lease cost	$	4,407	$	4,157	$	0	$	9,333	$	8,160
Finance lease cost
Amortization of lease assets	1,011		332				1,686		603
Interest on lease liabilities	216		56				366		104
Finance lease cost	1,227		388				2,052		707
Short-term lease cost	513		491				1,102		776
Variable lease cost	661		485				1,074		957
Total lease cost	$	6,808	$	5,521			$	13,561	$	10,600

Other information about lease amounts recognized in our Condensed Consolidated Financial Statements is summarized as follows:


	Three Months Ended				Six Months Ended
	March 31, 2023		March 31, 2022		March 31, 2023		March 31, 2022
Operating cash flows used for operating leases	$	5,867	$	5,111	$	11,818	$	9,351
Operating cash flows used for finance leases	216		56		366		104
Right-of-use assets obtained in exchange for new operating lease liabilities	2,872		3,984		9,191		11,499
Right-of-use assets obtained in exchange for new finance lease liabilities	1,882		1,328		4,826		2,582


	March 31, 2023		September 30, 2022
Weighted-average remaining lease term - operating leases	4.6 years		4.8 years
Weighted-average remaining lease term - finance leases	3.8 years		3.9 years
Weighted-average discount rate - operating leases	4.1	%	4.0	%
Weighted-average discount rate - finance leases	4.6	%	4.7	%

13. BUSINESS COMBINATIONS AND DIVESTITURES

We completed no acquisitions during the six months ended March 31, 2023 or during the year ended September 30, 2022.

On October 7, 2022, we sold 100% of the membership interests of STR Mechanical, LLC and its subsidiary Technical Services II, LLC (collectively, “STR”). As a result, we recognized a pre-tax gain of $13,045, which was included in “Gain on sale of assets” within our Condensed Consolidated Statements of Comprehensive Income for the six months ended March 31, 2023. The disposition of STR, which had operated as part of our Commercial & Industrial segment, will not have a material impact on our ongoing results of operations or financial position.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and the notes thereto, set forth in Part II, Item 8. “Financial Statements and Supplementary Data” as set forth in our Annual Report on Form 10-K for the fiscal year ended September 30, 2022, and the Condensed Consolidated Financial Statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q. The following discussion may contain forward looking statements. For additional information, see “Disclosure Regarding Forward Looking Statements” in Part I of this Quarterly Report on Form 10-Q.

OVERVIEW

Executive Overview

Please refer to Part I, Item 1. “Business” of our Annual Report on Form 10-K for the fiscal year ended September 30, 2022, for a discussion of the Company’s services and corporate strategy. IES Holdings, Inc., a Delaware corporation, designs and installs integrated electrical and technology systems and provides infrastructure products and services to a variety of end markets, including data centers, residential housing, and commercial and industrial facilities. Our operations are organized into four business segments: Communications, Residential, Infrastructure Solutions and Commercial & Industrial.

Current Market and Operating Conditions

The Federal Reserve raised the target federal funds rate throughout calendar year 2022 and in the first quarter of calendar year 2023, and has announced an expectation that it will continue to raise the target rate later in calendar year 2023. This has resulted in higher mortgage rates, which when combined with elevated materials and labor costs, have had a substantial impact on the affordability of housing. There continue to be several trends, such as rising household formation and population growth in our key markets, that we expect will drive long-term demand for our services in the single-family housing market. However, as calendar year 2023 progresses, we do expect decreased housing affordability to cause a near-term decrease in demand for our services in this market. Within the various other end markets we serve, our customers' capital budgets for new construction projects may be impacted by broader economic, technological or other factors.

In recent years, the COVID-19 pandemic and its impact on markets, the supply chain and the labor force influenced trends affecting our business. While commodity prices for some of the materials we procure have become less volatile, procurement and the supply chain remain areas of focus for us. We have also experienced in the past, and may again experience in the future, workforce disruptions related to exposure to, or illness from, COVID-19, resulting in production inefficiencies and delays, higher overtime costs, and the need to outsource activities or use more expensive contract labor. An inability to procure materials in a timely manner, to complete work on schedule, and to reflect higher materials or labor costs in our pricing to customers has had, and could continue to have, a significant impact on our operating results.

Please refer to Part I. Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended September 30, 2022 for further information.

RESULTS OF OPERATIONS

We report our operating results across our four operating segments: Communications, Residential, Infrastructure Solutions, and Commercial & Industrial. Expenses associated with our corporate office are classified separately. The following table presents selected historical results of operations of IES Holdings, Inc., including the results of acquired businesses from the dates acquired.


		Three Months Ended March 31,
		2023				2022
		$		%		$		%
		(Dollars in thousands, Percentage of revenues)
Revenues		$	568,881	100.0	%	$	501,593	100.0	%
	Cost of services	467,955		82.3		443,086		88.3
Gross profit		100,926		17.7		58,507		11.7
	Selling, general and administrative expenses	69,349		12.2		63,430		12.6
	Contingent consideration	69		—		69		—
	Gain on sale of assets	(102)		—		(68)		—
Operating income (loss)		31,610		5.6		(4,924)		(1.0)
	Interest and other (income) expense, net	(719)		(0.1)		419		0.1
Income (loss) from operations before income taxes		32,329		5.7		(5,343)		(1.1)
	Provision for (benefit from) income taxes	8,157		1.4		(1,293)		(0.3)
Net income (loss)		24,172		4.2		(4,050)		(0.8)
	Net income attributable to noncontrolling interest	(2,621)		(0.5)		(1,362)		(0.3)
Net income (loss) attributable to IES Holdings, Inc.		$	21,551	3.8	%	$	(5,412)	(1.1)	%

Consolidated revenues for the three months ended March 31, 2023, were $67.3 million higher than for the three months ended March 31, 2022, an increase of 13.4%, with increases at all four of our operating segments, driven by strong demand across our end markets. See further discussion below of changes in revenues for our individual segments.

Consolidated gross profit for the three months ended March 31, 2023 increased $42.4 million compared to the three months ended March 31, 2022. Our overall gross profit percentage was 17.7% during the three months ended March 31, 2023, as compared to 11.7% during the three months ended March 31, 2022. Gross profit as a percentage of revenue increased at all four of our operating segments. See further discussion below of changes in gross margin for our individual segments.

Selling, general and administrative expenses include costs not directly associated with performing work for our customers. These costs consist primarily of compensation and benefits related to corporate, segment and branch management (including incentive-based compensation), occupancy and utilities, training, professional services, information technology costs, consulting fees, travel and certain types of depreciation and amortization. We allocate certain corporate selling, general and administrative costs across our segments as we believe this more accurately reflects the costs associated with operating each segment.

During the three months ended March 31, 2023, our selling, general and administrative expenses were $69.3 million, an increase of $5.9 million, or 9.3%, over the three months ended March 31, 2022, driven largely by increased personnel costs at our Residential and Communications operating segments in connection with their growth, including higher incentive compensation at the division level as a result of higher earnings. Selling, general and administrative expenses as a percent of revenue decreased from 12.6% for the three months ended March 31, 2022 to 12.2% for the three months ended March 31, 2023, as we benefited from the increased scale of our operations.


		Six Months Ended March 31,
		2023				2022
		$		%		$		%
		(Dollars in thousands, Percentage of revenues)
	Revenues	$	1,143,755	100.0	%	$	982,102	100.0	%
	Cost of services	947,391		82.8		843,868		85.9
Gross profit		196,364		17.2		138,234		14.1
	Selling, general and administrative expenses	137,117		12.0		122,832		12.5
	Contingent consideration	138		—		138		—
	Gain on sale of assets	(13,162)		(1.2)		(73)		—
Operating income		72,271		6.3		15,337		1.6
	Interest and other expense, net	1,160		0.1		1,620		0.2
Income from operations before income taxes		71,111		6.2		13,717		1.4
	Provision for income taxes	18,185		1.6		2,688		0.3
Net income		52,926		4.6		11,029		1.1
	Net income attributable to noncontrolling interest	(4,973)		(0.4)		(1,977)		(0.2)
Net income attributable to IES Holdings, Inc.		$	47,953	4.2	%	$	9,052	0.9	%

Consolidated revenues for the six months ended March 31, 2023, were $161.7 million higher than for the six months ended March 31, 2022, an increase of 16.5%, with increases at our Communications, Residential and Infrastructure Solutions operating segments, slightly offset by a decrease at our Commercial & Industrial segment. See further discussion below of changes in revenues for our individual segments.

Our overall gross profit percentage increased to 17.2% during the six months ended March 31, 2023, as compared to 14.1% during the six months ended March 31, 2022. Gross profit as a percentage of revenue increased at all four of our operating segments. See further discussion below of changes in gross margin for our individual segments.

During the six months ended March 31, 2023, our selling, general and administrative expenses were $137.1 million, an increase of $14.3 million, or 11.6%, over the six months ended March 31, 2022, driven by increased personnel costs, primarily at our Residential operating segment in connection with its growth, including higher incentive compensation at the division level as a result of higher earnings. Selling, general and administrative expenses as a percent of revenue decreased from 12.5% for the six months ended March 31, 2022, to 12.0% for the six months ended March 31, 2023, as we benefited from the increased scale of our operations.

Gain on sale of assets. Our results for the six months ended March 31, 2023 include a pretax gain on sale of $13.0 million from the sale of STR Mechanical, LLC (“STR”) on October 7, 2022. STR previously operated as part of our Commercial & Industrial segment.

Communications


	Three Months Ended March 31,
	2023				2022
	$		%		$		%
	(Dollars in thousands, Percentage of revenues)
Revenues	$	141,120	100.0	%	$	130,639	100.0	%
Cost of services		115,957	82.2			119,518	91.5
Gross profit		25,163	17.8			11,121	8.5
Selling, general and administrative expenses		13,386	9.5			10,978	8.4
Gain on sale of assets		(3)	—			(7)	—
Operating income	$	11,780	8.3	%	$	150	0.1	%

Revenues. Our Communications segment’s revenues increased by $10.5 million during the three months ended March 31, 2023, or 8.0%, compared to the three months ended March 31, 2022. The increase primarily resulted from increased demand from our data center and high-tech manufacturing customers.

Gross Profit. Our Communications segment’s gross profit during the three months ended March 31, 2023 increased by $14.0 million compared to the three months ended March 31, 2022. Gross profit as a percentage of revenue increased from 8.5% to 17.8%. During the three months ended March 31, 2022,we expanded our offerings to our data center customers into a new, adjacent service area. As a

result of execution issues in this new area, we recorded $9.3 million of losses in the quarter ended March 31, 2022. Although these projects continued to negatively impact our results throughout fiscal 2022, we have since completed all such projects, and are no longer working in this service area.

Selling, General and Administrative Expenses. Our Communications segment’s selling, general and administrative expenses increased by $2.4 million, or 21.9%, during the three months ended March 31, 2023, compared to the three months ended March 31, 2022. The increase is primarily a result of higher personnel cost as we invest in an organizational structure that will enhance the scalability of our business, as well as higher wages in an increasingly competitive labor market. Selling, general and administrative expenses as a percentage of revenue in the Communications segment were 9.5% during the three months ended March 31, 2023, compared to 8.4% for the three months ended March 31, 2022.


	Six Months Ended March 31,
	2023				2022
	$		%		$		%
	(Dollars in thousands, Percentage of revenues)
Revenues	$	288,365	100.0	%	$	258,028	100.0	%
Cost of services		241,464	83.7			226,408	87.7
Gross profit		46,901	16.3			31,620	12.3
Selling, general and administrative expenses		25,683	8.9			22,363	8.7
Gain on sale of assets		(3)	—			(13)	—
Operating income	$	21,221	7.4	%	$	9,270	3.6	%

Revenues. Our Communications segment's revenues increased by $30.3 million during the six months ended March 31, 2023, or 11.8%, compared to the six months ended March 31, 2022. The increase primarily resulted from increased demand from our data center and high-tech manufacturing customers.

Gross Profit. Our Communications segment’s gross profit during the six months ended March 31, 2023 increased $15.3 million, or 48.3%, as compared to the six months ended March 31, 2022. Gross profit as a percentage of revenue increased from 12.3% to 16.3%. The increase primarily reflects the impact of certain project losses on gross profit in the six months ended March 31, 2022, as discussed above.

Selling, General and Administrative Expenses. Our Communications segment’s selling, general and administrative expenses increased $3.3 million, or 14.8%, during the six months ended March 31, 2023, compared to the six months ended March 31, 2022. The increase is a result of higher personnel cost as we invest in an organizational structure that will enhance the scalability of our business, as well as higher wages in an increasingly competitive labor market. Selling, general and administrative expenses as a percentage of revenues in the Communications segment increased from 8.7% during the six months ended March 31, 2022 to 8.9% during the six months ended March 31, 2023.

Residential


	Three Months Ended March 31,
	2023				2022
	$		%		$		%
	(Dollars in thousands, Percentage of revenues)
Revenues	$	306,112	100.0	%	$	260,406	100.0	%
Cost of services	251,281		82.1		214,862		82.5
Gross profit	54,831		17.9		45,544		17.5
Selling, general and administrative expenses	37,999		12.4		33,576		12.9
Contingent consideration	69		—		69		—

Operating income	$	16,763	5.5	%	$	11,899	4.6	%

Revenues. Our Residential segment’s revenues increased by $45.7 million, or 17.6%, during the three months ended March 31, 2023 compared to the three months ended March 31, 2022. The increase was driven by the impact of price increases in connection with higher materials costs and continued strong demand, particularly in the multi-family and Florida single-family markets. Single-family revenues increased by $19.1 million and multi-family and other revenues increased $26.6 million for the three months ended March 31, 2023 compared to the prior year period.

Gross Profit. During the three months ended March 31, 2023, our Residential segment's gross profit increased by $9.3 million, or 20.4%, compared to the three months ended March 31, 2022. The increase in gross profit was driven primarily by increased activity, as well as the impact of price increases. Gross profit as a percentage of revenue increased to 17.9% during the three months ended March 31, 2023, from 17.5% for the three months ended March 31, 2022, as prior year gross margins were negatively impacted by higher labor and material costs, but improved incrementally throughout fiscal year 2022 as pricing actions were implemented.

Selling, General and Administrative Expenses. Our Residential segment's selling, general and administrative expenses increased by $4.4 million, or 13.2%, during the three months ended March 31, 2023, compared to the three months ended March 31, 2022. The increase was driven by higher personnel costs in connection with business growth, including incentive profit sharing for division management. Selling, general and administrative expenses as a percentage of revenue in the Residential segment decreased to 12.4% during the three months ended March 31, 2023, compared to 12.9% in the three months ended March 31, 2022, as we benefited from the scale of our operations.


	Six Months Ended March 31,
	2023				2022
	$		%		$		%
	(Dollars in thousands, Percentage of revenues)
Revenues	$	624,190	100.0	%	$	502,182	100.0	%
Cost of services	509,740		81.7		414,000		82.4
Gross profit	114,450		18.3		88,182		17.6
Selling, general and administrative expenses	77,050		12.3		64,571		12.9
Contingent consideration	138		—		138		—
(Gain) loss on sale of assets	(6)		—		8		—
Operating income	$	37,268	6.0	%	$	23,465	4.7	%

Revenues. Our Residential segment's revenues increased by $122.0 million, or 24.3%, during the six months ended March 31, 2023, compared to the six months ended March 31, 2022. The increase was driven by the impact of price increases in connection with higher materials costs and continued strong demand, particularly in the multi-family and Florida single-family markets. Revenue in our single-family business increased by $72.4 million and multi-family and other revenue increased by $49.7 million for the six months ended March 31, 2023 compared to the prior year period.

Gross Profit. During the six months ended March 31, 2023, our Residential segment's gross profit increased by $26.3 million, or 29.8%, as compared to the six months ended March 31, 2022. The increase in gross profit was driven primarily by increased activity, as well as the impact of price increases. Gross margin as a percentage of revenue increased to 18.3% during the six months ended March 31, 2023, from 17.6% during the six months ended March 31, 2022, as prior year gross margins were negatively impacted by higher labor and material costs, but improved incrementally throughout fiscal year 2022 as pricing actions were implemented.

Selling, General and Administrative Expenses. Our Residential segment's selling, general and administrative expenses increased by $12.5 million, or 19.3%, during the six months ended March 31, 2023, compared to the six months ended March 31, 2022. The increase was driven by higher personnel costs in connection with business growth, including incentive profit sharing for division management. Selling, general and administrative expenses as a percentage of revenue in the Residential segment decreased to 12.3% during the six months ended March 31, 2023, from 12.9% during the six months ended March 31, 2022, as we benefited from the increased scale of our operations.

Infrastructure Solutions


	Three Months Ended March 31,
	2023				2022
	$		%		$		%
	(Dollars in thousands, Percentage of revenues)
Revenues	$	52,616	100.0	%	$	41,733	100.0	%
Cost of services		38,421	73.0			34,672	83.1
Gross profit		14,195	27.0			7,061	16.9
Selling, general and administrative expenses		5,990	11.4			6,391	15.3

Gain on sale of assets		—	—			(28)	(0.1)
Operating income	$	8,205	15.6	%	$	698	1.7	%

Revenues. Revenues in our Infrastructure Solutions segment increased $10.9 million during the three months ended March 31, 2023, an increase of 26.1% compared to the three months ended March 31, 2022, driven primarily by continued strong demand in our generator enclosures business.

Gross Profit. Our Infrastructure Solutions segment’s gross profit during the three months ended March 31, 2023 increased $7.1 million as compared to the three months ended March 31, 2022. Gross profit for the three months ended March 31, 2022 was negatively affected by the impact of supply chain disruptions, COVID-19 related labor inefficiencies, and operating inefficiencies in connection with the relocation of our Tulsa, Oklahoma operation to a new, larger facility in order to accommodate increased demand for our generator enclosure products. Gross profit as a percentage of revenue increased from 16.9% to 27.0%.

Selling, General and Administrative Expenses. Our Infrastructure Solutions segment’s selling, general and administrative expenses during the three months ended March 31, 2023 decreased $0.4 million when compared to the three months ended March 31, 2022, primarily as a result of a decrease in medical claims cost. Selling, general and administrative expenses as a percent of revenue decreased from 15.3% to 11.4% as we benefited from the scale of our operations.


	Six Months Ended March 31,
	2023				2022
	$		%		$		%
	(Dollars in thousands, Percentage of revenues)
Revenues	$	101,900	100.0	%	$	83,829	100.0	%
Cost of services		77,238	75.8			69,048	82.4
Gross profit		24,662	24.2			14,781	17.6
Selling, general and administrative expenses		11,751	11.5			12,449	14.9

Gain on sale of assets		(19)	—			(28)	—
Operating income	$	12,930	12.7	%	$	2,360	2.8	%

Revenues. Revenues in our Infrastructure Solutions segment increased $18.1 million, or 21.6%, during the six months ended March 31, 2023 compared to the six months ended March 31, 2022. The increase in revenue was driven primarily by increased demand at our generator enclosure business.

Gross Profit. Our Infrastructure Solutions segment’s gross profit during the six months ended March 31, 2023 increased $9.9 million as compared to the six months ended March 31, 2022. Gross profit for the six months ended March 31, 2022 was negatively impacted by supply chain disruptions in our generator enclosure business, COVID-19 related labor inefficiencies, and operating inefficiencies in connection with the relocation of the Wedlake business to a new, larger facility as discussed above. Gross profit as a percentage of revenues increased to 24.2% for the six months ended March 31, 2023 compared to 17.6% for the six months ended March 31, 2022.

Selling, General and Administrative Expenses. Our Infrastructure Solutions segment’s selling, general and administrative expenses during the six months ended March 31, 2023 decreased $0.7 million compared to the six months ended March 31, 2022, primarily as a result of a decrease in medical claims costs. Selling, general and administrative expenses as a percentage of revenue decreased from 14.9% for the six months ended March 31, 2022 to 11.5% for the six months ended March 31, 2023, as we benefited from the scale of our operations.

Commercial & Industrial


	Three Months Ended March 31,
	2023				2022
	$		%		$		%
	(Dollars in thousands, Percentage of revenues)
Revenues	$	69,033	100.0	%	$	68,815	100.0	%
Cost of services		62,296	90.2			74,034	107.6
Gross profit (loss)		6,737	9.8			(5,219)	(7.6)
Selling, general and administrative expenses		6,400	9.3			8,448	12.3
Gain on sale of assets		(99)	(0.1)			(33)	—
Operating income (loss)	$	436	0.6	%	$	(13,634)	(19.8)	%

Revenues. Revenues in our Commercial & Industrial segment increased $0.2 million, or 0.3%, during the three months ended March 31, 2023, compared to the three months ended March 31, 2022. STR, which we sold on October 7, 2022, contributed revenue of $4.3 million for the quarter ended March 31, 2022. The markets in which we operate remain highly competitive.

Gross Profit. Our Commercial & Industrial segment’s gross profit during the three months ended March 31, 2023, increased by $12.0 million, as compared to the three months ended March 31, 2022. Gross profit as a percentage of revenue increased from (7.6)% for the quarter ended March 31, 2022 to 9.8% for the quarter ended March 31, 2023. Our results for the quarter ended March 31, 2022 were impacted by losses recorded on two projects at one of our Commercial & Industrial branches. The first was a large contract experiencing execution issues, for which we recorded expense of $10.4 million including the accrual of estimated costs to complete the project, including demolition, purchase of replacement materials, and performance of rework. The second project experienced a reduction to gross profit of $1.8 million during the quarter ended March 31, 2022 caused by a delay in receiving materials from a supplier. We continue to limit the size and duration of projects bid at this branch.

Selling, General and Administrative Expenses. Our Commercial & Industrial segment’s selling, general and administrative expenses during the three months ended March 31, 2023 decreased $2.0 million, or 24.2%, compared to the three months ended March 31, 2022. The decrease was driven by a reduction in headcount, as well as the sale of STR. Selling, general and administrative expenses as a percentage of revenue decreased from 12.3% to 9.3% for the three months ended March 31, 2023 compared to the three months ended March 31, 2022.


	Six Months Ended March 31,
	2023				2022
	$		%		$		%
	(Dollars in thousands, Percentage of revenues)
Revenues	$	129,300	100.0	%	$	138,063	100.0	%
Cost of services		118,949	92.0			134,412	97.4
Gross profit		10,351	8.0			3,651	2.6
Selling, general and administrative expenses		12,089	9.3			15,716	11.4
Gain on sale of assets		(13,134)	(10.2)			(40)	—
Operating income (loss)	$	11,396	8.8	%	$	(12,025)	(8.7)	%

Revenues. Revenues in our Commercial & Industrial segment decreased $8.8 million during the six months ended March 31, 2023, or 6.3%, compared to the six months ended March 31, 2022, primarily as a result of the sale of STR. STR contributed revenue of $9.2 million for the six months ended March 31, 2022.

Gross Profit. Our Commercial & Industrial segment’s gross profit during the six months ended March 31, 2023 increased by $6.7 million, or 183.5%, compared to the six months ended March 31, 2022. Gross profit for the six months ended March 31, 2022 was negatively impacted by the losses recorded on the two projects discussed above. Gross profit as a percentage of revenue increased from 2.6% for the six months ended March 31, 2022 to 8.0% for the six months ended March 31, 2023.

Selling, General and Administrative Expenses. Our Commercial & Industrial segment’s selling, general and administrative expenses during the six months ended March 31, 2023 decreased $3.6 million, or 23.1%, compared to the six months ended March 31, 2022. The decrease was driven primarily by reduced headcount, the sale of STR, and a reduction in legal reserves recorded in the six months ended March 31, 2023 as compared with the six months ended March 31, 2022. Selling, general and administrative expenses as a percentage of revenue decreased from 11.4% for the six months ended March 31, 2022 to 9.3% for the six months ended March 31, 2023.

Gain on sale of assets. As discussed above, in October 2022, we sold STR and recorded a pretax gain on sale of $13.0 million.

INTEREST AND OTHER EXPENSE, NET


	Three Months Ended March 31,
	2023		2022
	(In thousands)
Interest expense	$	982	$	502
Deferred financing charges		67		41
Total interest expense		1,049		543
Other income, net		(1,768)		(124)
Total interest and other (income) expense, net	$	(719)	$	419

During the three months ended March 31, 2023, we incurred interest expense of $1.0 million primarily comprised of interest expense from our revolving credit facility, which had an average outstanding balance of $43.5 million, in addition to fees on an average letter of credit balance of $5.0 million under our revolving credit facility and an average unused line of credit balance of $106.6 million. This compares to interest expense of $0.5 million for the three months ended March 31, 2022, primarily comprised of interest expense from our revolving credit facility, which had an average outstanding balance of $78.5 million, in addition to fees on an average letter of credit balance of $5.0 million under our revolving credit facility and an average unused line of credit balance of $46.1 million. The increase in interest expense in the three months ended March 31, 2023 compared to the three months ended March 31, 2022 was a result of higher borrowing rates, partly offset by a decrease in average outstanding borrowings under our revolving credit facility.

The improvement in other (income) expense, net for the three months ended March 31, 2023 as compared with March 31, 2022 is primarily the result of gains on investments in equity securities of $1.7 million during the three months ended March 31, 2023, compared with losses of $0.2 million during the three months ended March 31, 2022.


	Six Months Ended March 31,
	2023		2022
	(In thousands)
Interest expense	$	2,101	$	891
Deferred financing charges		132		88
Total interest expense		2,233		979
Other (income) expense, net		(1,073)		641
Total interest and other expense, net	$	1,160	$	1,620

During the six months ended March 31, 2023, we incurred interest expense of $2.2 million primarily comprised of interest expense from our revolving credit facility, which had an average outstanding balance of $52.4 million, in addition to fees on an average letter of credit balance of $5.2 million under our revolving credit facility and an average unused line of credit balance of $93.5 million. This compares to interest expense of $1.0 million for the six months ended March 31, 2022, primarily comprised of interest expense from our revolving credit facility, which had an average outstanding balance of $68.7 million, in addition to fees on an average letter of credit balance of $4.9 million under our revolving credit facility and an average unused line of credit balance of $44.5 million. The increase in interest expense in the six months ended March 31, 2023 compared to the six months ended March 31, 2022 was a result of higher borrowing rates, partly offset by a decrease in average outstanding borrowings under our revolving credit facility.

The improvement in other (income) expense, net for the six months ended March 31, 2023 as compared with March 31, 2022 is primarily the result of gains on investments in equity securities of $0.9 million in the six months ended March 31, 2023, compared to unrealized losses on investments in equity securities of $0.6 million in the six months ended March 31, 2022.

PROVISION FOR INCOME TAXES

We recorded income tax expense of $8.2 million for the three months ended March 31, 2023, compared to an income tax benefit of $1.3 million for the three months ended March 31, 2022, driven by reporting pretax income in the three months ended March 31, 2023 compared to a pretax loss in the prior year period.

We recorded income tax expense of $18.2 million for the six months ended March 31, 2023, compared to income tax expense of $2.7 million for the six months ended March 31, 2022, driven by increased pretax income. Income tax expense for the six months ended March 31, 2023 and 2022 included a benefit of $0.2 million and $0.8 million, respectively, related to the vesting of stock-based compensation.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management’s discussion and analysis of financial condition and results of operations is based on our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q, which have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). The preparation of our Condensed Consolidated Financial Statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities known to exist as of the date of the Condensed Consolidated Financial Statements, and the reported amounts of revenues and expenses recognized during the periods presented. We review all significant estimates affecting our Condensed Consolidated Financial Statements on a recurring basis and record the effect of any necessary adjustments prior to their publication. Judgments and estimates are based on our beliefs and assumptions derived from information available at the time such judgments and estimates are made. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of financial statements. There can be no assurance that actual results will not differ from those estimates. For a discussion of our significant accounting policies, please see our Annual Report on Form 10-K for the fiscal year ended September 30, 2022. Some of the more significant estimates include revenue recognition, business combinations, valuation allowance for deferred tax assets and income taxes.

There have been no significant changes to our accounting policies as disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2022.

REMAINING PERFORMANCE OBLIGATIONS AND BACKLOG

Remaining performance obligations represent the unrecognized revenue value of our contractual commitments. While backlog is not a defined term under GAAP, it is a common measurement used in our industry, and we believe it improves our ability to forecast future results and identify operating trends that may not otherwise be apparent. Backlog is a measure of revenue that we expect to recognize from work that has yet to be performed on uncompleted contracts and from work that has been contracted but has not started, exclusive of short-term projects. While all of our backlog is supported by documentation from customers, backlog is not a guarantee of future revenues, as contractual commitments may change and our performance may vary. Not all of our work is performed under contracts included in backlog; for example, most of the apparatus repair work that is completed by our Infrastructure Solutions segment is performed under master service agreements on an as-needed basis. Additionally, electrical installation services for single-family housing at our Residential segment are completed on a short-term basis and are therefore excluded from backlog. The table below summarizes our remaining performance obligations and backlog (in thousands):


	March 31,		December 31,		September 30,		June 30,
	2023		2022		2022		2022
Remaining performance obligations	$	1,012,111	$	1,011,018	$	967,001	$	893,923
Agreements without an enforceable obligation (1)		376,948		316,385		319,448		314,448
Backlog	$	1,389,059	$	1,327,403	$	1,286,449	$	1,208,371
(1) Our backlog contains signed agreements and letters of intent, which we do not have a legal right to enforce prior to work starting. These arrangements are excluded from remaining performance obligations until work begins.

WORKING CAPITAL

During the six months ended March 31, 2023, working capital exclusive of cash increased by $6.1 million from September 30, 2022, reflecting a $28.9 million decrease in current liabilities partially offset by a $22.8 million decrease in current assets excluding cash during the period.

During the six months ended March 31, 2023, our current assets exclusive of cash decreased to $576.8 million, as compared to $599.6 million as of September 30, 2022. A seasonal decrease in business activity, as well as the collection of $5.1 million of aged receivables related to prior year contractual disputes, drove a $40.1 million decrease in trade accounts receivable. Days sales outstanding decreased from 58 at September 30, 2022 to 55 at March 31, 2023. While the rate of collections may vary, our typically secured position, resulting from our ability in general to secure liens against our customers’ overdue receivables, offers some protection that collection will occur eventually to the extent that our security retains value. The decrease in trade accounts receivable was partly offset by a $10.0 million increase in inventories as a result of the timing of receipt of certain large materials orders by our Residential business, as well as an increase in activity for custom power solutions in our Infrastructure Solutions business. Retainage also increased by $8.9 million, driven by the timing of certain large projects approaching completion.

During the six months ended March 31, 2023, our total current liabilities decreased by $28.9 million to $373.0 million, compared to $401.9 million as of September 30, 2022, driven by a seasonal decrease in business activity, as well as the remittance of all remaining payroll taxes deferred under the Coronavirus Aid, Relief and Economic Security Act.

Surety

We believe the bonding capacity provided by our sureties is adequate for our current operations and will be adequate for our operations for the foreseeable future. As of March 31, 2023, the estimated cost to complete our bonded projects was approximately $129.5 million.

LIQUIDITY AND CAPITAL RESOURCES

The Revolving Credit Facility

We are a party to the Third Amended and Restated Credit and Security Agreement (the "Amended Credit Agreement"), which provides for a maximum borrowing amount of $150 million. The Amended Credit Agreement contains customary affirmative, negative and financial covenants and events of default.

Borrowings under the Amended Credit Agreement may not exceed a Borrowing Base, as defined in the Amended Credit Agreement, that is determined monthly based on available collateral, primarily certain accounts receivables, inventories, and equipment. Amounts outstanding bear interest at a per annum rate equal to the Daily Three Month Secured Overnight Financing Rate ("SOFR"), plus an interest rate margin, which is determined quarterly, based on the following thresholds:

Level

Thresholds

Interest Rate Margin

If Liquidity is less than 35% of the Maximum Revolver Amount (each as defined in the Amended Credit Agreement) at any time during the period

2.00 percentage points

If Liquidity is greater than or equal to 35% of the Maximum Revolver Amount at all times during the period and less than 50% of the Maximum Revolver Amount at any time during the period

1.75 percentage points

III

If Liquidity is greater than or equal to 50% of the Maximum Revolver Amount at all times during the period

1.50 percentage points

In addition, we are charged monthly in arrears for (1) an unused commitment fee of 0.25% per annum, (2) a collateral monitoring fee of $5 thousand per quarter, (3) a letter of credit fee based on the then-applicable interest rate margin (4) appraisal fees, costs and expenses and (5) certain other fees and charges as specified in the Amended Credit Agreement.

As of March 31, 2023, we were in compliance with the financial covenants under the Amended Credit Agreement, requiring that we maintain:

•a Fixed Charge Coverage Ratio (as defined in the Amended Credit Agreement), measured quarterly on a trailing four-quarter basis at the end of each quarter, of at least 1.1 to 1.0; and

•minimum Liquidity of at least 10% of the Maximum Revolver Amount, or $15.0 million; with, for purposes of this covenant, at least 50% of our Liquidity comprised of Excess Availability (as defined in the Amended Credit Agreement).

At March 31, 2023, our Liquidity was $143.0 million, our Excess Availability was $127.8 million (or greater than 50% of minimum Liquidity), and our Fixed Charge Coverage Ratio was 3.0:1.0.

If in the future our Liquidity falls below $15.0 million (or Excess Availability falls below 50% of our minimum Liquidity), our Fixed Charge Coverage Ratio is less than 1.1:1.0, or if we otherwise fail to perform or otherwise comply with certain of our covenants or other agreements under the Amended Credit Agreement, it would result in an event of default under the Amended Credit Agreement, which could result in some or all of our then-outstanding indebtedness becoming immediately due and payable.

At March 31, 2023, we had $4.4 million in outstanding letters of credit and outstanding borrowings of $15.1 million under our revolving credit facility.

Operating Activities

Our cash flow from operations is not only influenced by cyclicality, demand for our services, operating margins and the type of services we provide, but can also be influenced by working capital needs such as the timing of our receivable collections. Working capital needs are generally lower during our fiscal first and second quarters due to the seasonality that we experience in many regions of the country; however, a seasonal decline in working capital may be offset by needs associated with higher growth or acquisitions. Currently, our working capital needs are higher than they have been historically, as a result of growth of our business, elevated commodity prices, and the steps taken to mitigate the impact of supply chain disruptions.

Net cash provided by operating activities was $60.1 million during the six months ended March 31, 2023, as compared to $2.9 million of net cash used in operating activities in the six months ended March 31, 2022. The increase in operating cash flow resulted from increased earnings and a reduction in cash used in working capital during the six months ended March 31, 2023 as compared with the six months ended March 31, 2022.

Investing Activities

Net cash provided by investing activities was $12.3 million for the six months ended March 31, 2023, compared to $21.9 million used in investing activities in the six months ended March 31, 2022. During the six months ended March 31, 2023, the sale of assets, including the sale of STR, provided cash of $19.1 million, which was partially offset by $6.7 million used for capital expenditures. During the six months ended March 31, 2022, we used $21.6 million for capital expenditures primarily related to the acquisition of a new operating facility for our Wedlake business, as well as an additional facility to support the growth of our Residential business in Florida.

Financing Activities

Net cash used in financing activities for the six months ended March 31, 2023 was $82.1 million, compared to $21.0 million provided by financing activities for the six months ended March 31, 2022. Net cash used in financing activities for the six months ended March 31, 2023 included net repayments on our credit facility of $67.5 million and $7.6 million used for repurchases of our common stock, including repurchases to satisfy statutory withholding requirements upon the vesting of employee stock compensation. Additionally, we distributed $5.3 million to noncontrolling interests under operating agreements in connection with certain acquisitions. Net cash provided by financing activities for the six months ended March 31, 2022 included net borrowings on our credit facility of $29.9 million, partly offset by $4.9 million used to repurchase our common stock, including repurchases to satisfy statutory withholding requirements upon the vesting of employee stock compensation.

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 $40.0 million 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 pre-set terms at times when the Company might otherwise be prevented from purchasing under insider trading laws or because of self-imposed blackout periods. The program does not require the Company to purchase any specific number of shares and may be modified, suspended, reinstated, or terminated at any time at the Company’s discretion and without notice. We repurchased 223,779 shares pursuant to our repurchase programs during the six months ended March 31, 2023.

MATERIAL CASH REQUIREMENTS

From time to time, we may enter into firm purchase commitments for materials, such as copper or aluminum wire, which we expect to use in the ordinary course of business. These commitments are typically for terms of less than one year and require us to buy minimum quantities of materials at specific intervals at a fixed price over the term. As of March 31, 2023, we had commitments of $6.0 million outstanding under agreements to purchase copper wire and other materials over the next 12 months in the ordinary course of business. There have been no other material changes in our material cash requirements from those disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2022. We expect that cash and cash equivalents, cash flow from operations and availability under our revolving credit facility will be sufficient to satisfy cash requirements during at least the next 12 months.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Management is actively involved in monitoring exposure to market risk and continues to develop and utilize appropriate risk management techniques. Our exposure to significant market risks includes fluctuations in labor costs and commodity prices. We are also exposed to interest rate risk with respect to our outstanding borrowings under our revolving credit facility. For additional information see “Disclosure Regarding Forward-Looking Statements” in Part I of this Quarterly Report on Form 10-Q and our risk factors in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2022.

Commodity Risk

Our exposure to significant market risks includes fluctuations in commodity prices for copper, aluminum, steel, electronic components, certain plastics, and fuel. Commodity price risks may have an impact on our results of operations due to the fixed-price nature of many of our contracts. Over the long term, we expect to be able to pass along a portion of these costs to our customers, as market conditions in the industries we serve will allow.

Interest Rate Risk

Floating rate debt, where the interest rate fluctuates periodically, exposes us to short-term changes in market interest rates. All of the long-term debt outstanding under our revolving credit facility is structured on floating rate terms. We currently do not maintain any hedging contracts that would limit our exposure to variable rates of interest when we have outstanding borrowings under our revolving credit facility. The Amended Credit Agreement uses SOFR as the benchmark for establishing the interest rate charged on our borrowings. If SOFR were to increase, our interest payment obligations on any then-outstanding borrowings would increase, having a negative effect on our cash flow and financial condition. A one percentage point increase in the interest rate on our long-term debt outstanding under the credit facility of $15.1 million as of March 31, 2023 would cause a $0.2 million pre-tax annual increase in interest expense.

Item 4. Controls and Procedures

Changes in Internal Control Over Financial Reporting

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Disclosure Controls and Procedures

In accordance with Rules 13a-15 and 15d-15 of the Exchange Act, we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2023, to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Our disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

For information regarding legal proceedings, see Note 12, “Commitments and Contingencies – Legal Matters” in the Notes to our Condensed Consolidated Financial Statements set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

Item 1A. Risk Factors

There have been no material changes to the risk factors disclosed under Part I, Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended September 30, 2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds


Date	Total Number of Shares Purchased (1)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of a Publicly Announced Plan	Maximum Dollar Value of Shares That May Yet Be Purchased Under the Publicly Announced Plan (2)
January 1, 2023 – January 31, 2023	4,253	$	34.95	4,048	$	37,598,324
February 1, 2023 – February 28, 2023	—	$	—	—	$	37,598,324
March 1, 2023 – March 31, 2023	—	$	—	—	$	37,598,324
Total	4,253	$	34.95	4,048	$	37,598,324

(1) The total number of shares purchased includes shares purchased pursuant to the program described in footnote (2) below.

(2) In 2015, our Board authorized a stock repurchase program for the purchase of up to 1.5 million shares of the Company’s common stock from time to time, 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 existing program, and authorized a new $40 million share repurchase program.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

Item 6. Exhibits


Exhibit No.			Description
3.1 —			Second Amended and Restated Certificate of Incorporation of IES Holdings, Inc., as amended by the Certificate of Amendment thereto, effective May 24, 2016 (composite). (Incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q filed on August 8, 2016).
3.2 —			Amended and Restated Bylaws of IES Holdings, Inc., effective April 28, 2021. (Incorporated by reference to Exhibit 3.3 to the Company's Quarterly Report on Form 10-Q filed on April 30, 2021).
4.1 —			Specimen common stock certificate. (Incorporated by reference to Exhibit 4.1 to the Company’s Annual Report on Form 10-K filed on December 9, 2016).
31.1 —			Rule 13a-14(a)/15d-14(a) Certification of Jeffrey L. Gendell, Chief Executive Officer (1)
31.2 —			Rule 13a-14(a)/15d-14(a) Certification of Tracy A. McLauchlin, Senior Vice President, Chief Financial Officer and Treasurer (1)
32.1 —			Section 1350 Certification of Jeffrey L. Gendell, Chief Executive Officer (2)
32.2 —			Section 1350 Certification of Tracy A. McLauchlin, Senior Vice President, Chief Financial Officer and Treasurer (2)
101.INS			Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document (1)
101.SCH			XBRL Schema Document (1)
101.LAB			XBRL Label Linkbase Document (1)
101.PRE			XBRL Presentation Linkbase Document (1)
101.DEF			XBRL Definition Linkbase Document (1)
101.CAL			XBRL Calculation Linkbase Document (1)
104			Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

(1)			Filed herewith.
(2)			Furnished herewith.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on May 10, 2023.


			IES HOLDINGS, INC.


			By:			/s/ TRACY A. MCLAUCHLIN
						Tracy A. McLauchlin
						Senior Vice President, Chief Financial Officer and Treasurer
						(Principal Financial Officer and Authorized Signatory)

Document

Exhibit 31.1

CERTIFICATION

I, Jeffrey L. Gendell, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of IES Holdings, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: May 10, 2023


			/s/ JEFFREY L. GENDELL
			Jeffrey L. Gendell
			Chief Executive Officer as Principal Executive Officer

Document

Exhibit 31.2

CERTIFICATION

I, Tracy A. McLauchlin, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of IES Holdings, Inc.;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: May 10, 2023


			/s/ TRACY A. MCLAUCHLIN
			Tracy A. McLauchlin
			Senior Vice President, Chief Financial Officer and Treasurer as Principal Financial Officer

Document

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with this Quarterly Report of IES Holdings, Inc. (the “Company”) on Form 10-Q for the period ending March 31, 2023 (the “Report”), I, Jeffrey L. Gendell, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 10, 2023

By:

/s/ JEFFREY L. GENDELL

Jeffrey L. Gendell

Chief Executive Officer as Principal Executive Officer

Document

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with this Quarterly Report of IES Holdings, Inc. (the “Company”) on Form 10-Q for the period ending March 31, 2023 (the “Report”), I, Tracy A. McLauchlin, Senior Vice President, Chief Financial Officer and Treasurer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 10, 2023

By:

/s/ TRACY A. MCLAUCHLIN

Tracy A. McLauchlin

Senior Vice President, Chief Financial Officer and Treasurer

as Principal Financial Officer