Item 2. Management’s Discussion and Analysis
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion of the financial condition and results of operations of Energy Services in conjunction with the “Financial Statements” appearing in this report as well as the historical financial statements and related notes contained elsewhere herein. Among other things, those historical consolidated financial statements include more detailed information regarding the basis of presentation for the following information. The term “Energy Services” refers to the Company, West Virginia Pipeline, SQP, Tri-State Paving, Ryan Construction, Tribute, and C.J. Hughes and C.J. Hughes’ wholly owned subsidiaries on a consolidated basis.
Forward Looking Statements
Within Energy Services’ (as defined below) consolidated financial statements and this Quarterly Report on Form 10-Q, there are included statements reflecting assumptions, expectations, projections, intentions, or beliefs about future events that are intended as “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They use words such as “anticipate,” “estimate,” “project,” “forecast,” “may,” “will,” “should,” “could,” “expect,” “believe,” “intend” and other words of similar meaning.
These forward-looking statements do not guarantee future performance and involve or rely on risks, uncertainties, and assumptions that are difficult to predict or beyond Energy Services’ control. Energy Services has based its forward-looking statements on management’s beliefs and assumptions based on information available to management at the time the statements are made. Actual outcomes and results may differ materially from what is expressed, implied, and forecasted by forward-looking statements and any or all of Energy Services’ forward-looking statements may turn out to be wrong. The accuracy of such statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties.
All the forward-looking statements, whether written or oral, are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this report. In addition, Energy Services does not undertake and expressly disclaims any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this report or otherwise.
Company Overview
Energy Services of America Corporation (“Energy Services” or the “Company”), formed in 2006, is a contractor and service company that operates primarily in the mid-Atlantic and central regions of the United States and provides services to customers in the natural gas, petroleum, water distribution, automotive, chemical, and power industries. For the gas industry, the Company is primarily engaged in the construction, replacement and repair of natural gas pipelines and storage facilities for utility companies and private natural gas companies. Energy Services is involved in the construction of both interstate and intrastate pipelines, with an emphasis on the latter. For the oil industry, the Company provides a variety of services relating to pipeline, storage facilities and plant work. For the power, chemical, and automotive industries, the Company provides a full range of electrical and mechanical installations and repairs including substation and switchyard services, site preparation, equipment setting, pipe fabrication and installation, packaged buildings, transformers, and other ancillary work with regards thereto. Energy Services’ other pipeline services include corrosion protection services, horizontal drilling services, liquid pipeline construction, pump station construction, production facility construction, water and sewer pipeline installations, various maintenance and repair services and other services related to pipeline construction. The Company has also added the ability to perform horizontal directional drilling, civil, and general contracting services.
The Company had consolidated operating revenues of $130.0 million for the three months ended June 30, 2026, of which 46.6% was attributable to electrical, mechanical, and general contract services, 16.3% to gas and petroleum transmission projects, and 37.1% to gas & water distributions services. The Company had consolidated operating revenues of $103.6 million for the three months ended June 30, 2025, of which 48.0% was attributable to electrical, mechanical, and general contract services, 14.8% to gas and petroleum transmission projects, and 37.2% to gas & water distributions services.
The Company had consolidated operating revenues of $337.3 million for the nine months ended June 30, 2026, of which 47.7% was attributable to electrical, mechanical, and general contract services, 16.7% to gas and petroleum transmission projects, and 35.6% to gas & water distributions services. The Company had consolidated operating revenues of $280.9 million for the nine months ended June 30, 2025, of which 52.3% was attributable to electrical, mechanical, and general contract services, 13.2% to gas and petroleum transmission projects, and 34.5% to gas & water distributions services.
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Energy Services’ customers include many of the leading companies in the industries it serves, including:
TransCanada Corporation
NiSource, Inc.
Marathon Petroleum
Mountaineer Gas
Nucor Steel West Virginia
American Electric Power
Toyota Motor Manufacturing
Bayer Chemical
Dow Chemical
Kentucky American Water
WV American Water
Various state, county, and municipal public service districts.
The majority of the Company’s customers are in West Virginia, Virginia, Ohio, Pennsylvania, and Kentucky. However, the Company also performs work in other states including Alabama, Michigan, Illinois, Tennessee, North Carolina, and Indiana.
Energy Services’ sales force consists of industry professionals with significant relevant sales experience, who utilize industry contacts and available public data to determine how to market the Company’s line of products most appropriately. The Company relies on direct contact between its sales force and customers’ engineering and contracting departments to obtain new business.
A substantial portion of the Company’s workforce are union members of various construction-related trade unions and are subject to separately negotiated collective bargaining agreements that expire at varying time intervals. The Company believes its relationship with its unionized workforce is good.
C.J. Hughes Construction Company, Inc. (“C.J. Hughes”), a wholly owned subsidiary of the Company, is a general contractor primarily engaged in pipeline construction for utility companies. Contractors Rental Corporation (“Contractors Rental”), a wholly owned subsidiary of C.J. Hughes, provides union building trade employees for projects managed by C.J. Hughes.
Nitro Construction Services, Inc. (“NCS”), a wholly owned subsidiary of C.J. Hughes, provides electrical, mechanical, HVAC/R, and fire protection services to customers primarily in the automotive, chemical, and power industries. Nitro Electric Company, LLC (“Nitro Electric”), a wholly owned subsidiary of NCS, performs industrial electrical work and has a satellite office registered in Michigan. Pinnacle Technical Solutions, Inc. (“Pinnacle”), a wholly owned subsidiary of NCS, operates as a data storage facility within Nitro’s office building. Pinnacle is supported by NCS and has no employees of its own. NCS and its subsidiaries will collectively be referred to “Nitro”. Revolt Energy, LLC (“Revolt”), formerly a wholly owned subsidiary of NCS, that performed residential solar installations projects, was sold for a nominal consideration on March 1, 2025 in a transaction that was not material to the Company’s Consolidated Financial Statements. On September 30, 2025, Nitro completed the asset acquisition of Rigney Digital System Ltd. (“Rigney”), an HVAC/R controls company located in Hurricane, WV, which operates as a division of Nitro.
All C.J. Hughes, Nitro, and Contractors Rental construction personnel are union members of various related construction trade unions and are subject to collective bargaining agreements that expire at varying time intervals.
West Virginia Pipeline, Inc. (“West Virginia Pipeline” or “WVP”), a wholly owned subsidiary of Energy Services, operates as a gas and water distribution contractor primarily in southern West Virginia. The employees of West Virginia Pipeline are non-union and are managed independently of the Company’s union subsidiaries.
SQP Construction Group, Inc. (“SQP”), a wholly owned subsidiary of Energy Services, operates as a general contractor primarily in West Virginia. SQP engages in the construction and renovation of buildings and other civil construction projects for state and local government agencies and commercial customers. As a general contractor, SQP manages the overall construction project and subcontracts most of the work. The employees of SQP are non-union and are managed independently of the Company’s union subsidiaries.
Tri-State Paving & Sealcoating, Inc. (“TSP” or “Tri-State Paving”), a wholly owned subsidiary of Energy Services, provides utility paving services to water distribution customers in the Charleston, West Virginia, Lexington, Kentucky, and Chattanooga, Tennessee markets. The employees of TSP are non-union and are managed independently of the Company’s union subsidiaries.
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Ryan Construction Services Inc. (“Ryan Construction” or “RCS”), a wholly owned subsidiary of Energy Services, provides directional drilling services for broadband service providers along with offering natural gas distribution services, cathodic protection and corrosion prevention services, and civil construction services. Ryan Construction operates primarily in West Virginia and Pennsylvania. The employees of RCS are non-union and are managed independently of the Company’s union subsidiaries.
Tribute Contracting & Consultants, Inc. (“Tribute” or “TCC”), a wholly owned subsidiary of Energy Services, was formed in October 2024 in connection with the acquisition of substantially all the assets of Tribute Contracting & Consultants, LLC (“Tribute LLC”). Tribute constructs water distribution and wastewater systems primarily for public municipalities in West Virginia, Ohio, and Kentucky. The employees of TCC are non-union and are managed independently of the Company’s union subsidiaries.
The Company’s website address is www.energyservicesofamerica.com. Information on our website is not part of this Quarterly Report on Form 10-Q unless otherwise stated.
The Securities and Exchange Commission (the “SEC”) maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding the Company. The Company makes available free of charge through its website its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports filed with the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. These items are available as soon as reasonably practicable after we electronically file or furnish such material with the SEC. These materials are also available free of charge by written request to: Charles Crimmel, Chief Financial Officer and Corporate Secretary, Energy Services of America Corporation, 75 West 3 rd Ave., Huntington, West Virginia 25701.
Seasonality: Fluctuation of Results
Our revenues and results of operations can and usually are subject to seasonal variations. These variations are the result of weather, customer spending patterns, bidding seasons and holidays. The first quarter of the calendar year is typically the slowest in terms of revenues because inclement weather conditions cause delays in production and customers usually do not plan large projects during that time. While usually better than the first quarter, the second calendar year quarter often has some inclement weather which can cause delays in production, reducing the revenues the Company receives and/or increasing the production costs. The third and fourth calendar year quarters usually are less impacted by weather and usually have the largest number of projects underway. Many projects are completed in the fourth calendar year quarter and revenues are often impacted by customers seeking to either spend their capital budget for the year or scale back projects due to capital budget overruns.
In addition to the fluctuations discussed above, the pipeline industry can be highly cyclical, reflecting variances in capital expenditures in proportion to energy price fluctuations. As a result, our volume of business may be adversely affected by where our customers are in the cycle and thereby their financial condition as to their capital needs and access to capital to finance those needs.
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Three and nine months ended June 30, 2026 and 2025 Overview
The following is an overview of results from operations for the three and nine months ended June 30, 2026 and 2025:
Three Months Ended
Three Months Ended
Nine Months Ended
Nine Months Ended
June 30,
June 30,
June 30,
June 30,
2026
2025
2026
2025
Revenue
$
130,005,928
$
103,601,585
$
337,291,570
$
280,926,850
Cost of revenue
115,688,703
91,618,987
298,748,217
258,602,810
Gross profit
14,317,225
11,982,598
38,543,353
22,324,040
Selling and administrative expenses
9,685,305
8,814,545
27,940,257
25,602,253
Income (loss) from operations
4,631,920
3,168,053
10,603,096
(3,278,213)
Other nonoperating expense
(118,403)
(38,529)
(315,268)
(107,407)
Interest expense
(486,914)
(781,198)
(2,098,600)
(2,140,686)
Gain on sale of equipment
5,097
(128,710)
93,846
50,532
(600,220)
(948,437)
(2,320,022)
(2,197,561)
Income (loss) before income taxes
4,031,700
2,219,616
8,283,074
(5,475,774)
Income tax expense (benefit)
745,041
137,987
2,075,386
(1,612,718)
Net (loss) income
$
3,286,659
$
2,081,629
$
6,207,688
$
(3,863,056)
Weighted average shares outstanding-basic
18,622,477
16,625,761
17,614,419
16,644,028
Weighted average shares-diluted
18,659,624
16,666,135
17,653,687
16,644,028
Earnings (loss) per share available to common shareholders
$
0.18
$
0.13
$
0.35
$
(0.23)
Earnings (loss) per share-diluted available to common shareholders
$
0.18
$
0.12
$
0.35
$
(0.23)
Results of Operations for the Three and Nine months ended June 30, 2026 Compared to the Three and Nine months ended June 30, 2025
Revenues. The following table compares the Company’s revenues for the three and nine months ended June 30, 2026 to the corresponding periods in 2025:
Three Months Ended
June 30, 2026
% of total
June 30, 2025
% of total
Change
% Change
Gas & Water Distribution
$
48,268,807
37.1
%
$
38,566,422
37.2
%
9,702,385
25.2
%
Gas & Petroleum Transmission
21,230,426
16.3
%
15,325,950
14.8
%
5,904,476
38.5
%
Electrical, Mechanical, & General
60,506,695
46.6
%
49,709,213
48.0
%
10,797,482
21.7
%
Total
$
130,005,928
100.0
%
$
103,601,585
100.0
%
26,404,343
25.5
%
Nine Months Ended
June 30, 2026
% of total
June 30, 2025
% of total
Change
% Change
Gas & Water Distribution
$
120,216,883
35.6
%
$
96,967,546
34.5
%
$
23,249,337
24.0
%
Gas & Petroleum Transmission
56,379,242
16.7
%
37,177,225
13.2
%
19,202,017
51.6
%
Electrical, Mechanical, & General
160,695,445
47.7
%
146,782,079
52.3
%
13,913,366
9.5
%
Total
$
337,291,570
100.0
%
$
280,926,850
100.0
%
$
56,364,720
20.1
%
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Total revenues increased by $26.4 million to $130.0 million for the three months ended June 30, 2026, compared to $103.6 million for the three months ended June 30, 2025. For the nine months ended June 30, 2026, total revenues increased by $56.4 million to $337.3 million, compared to $280.9 million for the same period in 2025. These increases primarily reflected higher activity levels across each of the Company’s principal business lines during the three- and nine-month periods ended June 30, 2026.
Gas & Water Distribution revenues were $48.3 million for the three months ended June 30, 2026, an increase of $9.7 million from $38.6 million for the three months ended June 30, 2025. For the nine months ended June 30, 2026, revenues were $120.2 million, an increase of $23.2 million from $97.0 million for the same period in 2025. These increases were primarily due to increased water distribution construction activity during the 2026 periods.
Gas & Petroleum Transmission revenues were $21.2 million for the three months ended June 30, 2026, an increase of $5.9 million from $15.3 million for the three months ended June 30, 2025. For the nine months ended June 30, 2026, revenues were $56.4 million, an increase of $19.2 million from $37.2 million for the same period in 2025. These increases were primarily due to transmission projects awarded during the first quarter of fiscal 2026 and more favorable project timing, as most transmission work in fiscal 2025 commenced during the third fiscal quarter.
Electrical, Mechanical, & General Construction Services revenues were $60.5 million for the three months ended June 30, 2026, an increase of $10.8 million from $49.7 million for the three months ended June 30, 2025. For the nine months ended June 30, 2026, revenues were $160.7 million, an increase of $13.9 million from $146.8 million for the same period in 2025. These increases were primarily due to increased electrical construction activity during the 2026 periods.
Cost of Revenues. The following table compares the Company’s cost of revenues for the three and nine months ended June 30, 2026 to the corresponding periods in 2025:
Three Months Ended
June 30, 2026
June 30, 2025
% of total
Change
% Change
Gas & Water Distribution
$
40,198,436
34.7
%
$
31,887,569
34.8
%
$
8,310,867
26.1
%
Gas & Petroleum Transmission
21,247,215
18.4
%
14,202,197
15.5
%
7,045,018
49.6
%
Electrical, Mechanical, & General
53,363,874
46.1
%
44,434,633
48.5
%
8,929,241
20.1
%
Unallocated Shop Expenses
879,178
0.8
%
1,094,588
1.2
%
(215,410)
(19.7)
%
Total
$
115,688,703
100.0
%
$
91,618,987
100.0
%
$
24,069,716
26.3
%
Nine Months Ended
June 30, 2026
June 30, 2025
% of total
Change
% Change
Gas & Water Distribution
$
103,262,675
34.6
%
$
86,036,289
33.3
%
$
17,226,386
20.0
%
Gas & Petroleum Transmission
50,036,289
16.7
%
36,324,749
14.0
%
13,711,540
37.7
%
Electrical, Mechanical, & General
141,531,684
47.4
%
132,914,207
51.4
%
8,617,477
6.5
%
Unallocated Shop Expenses
3,917,569
1.3
%
3,327,565
1.3
%
590,004
17.7
%
Total
$
298,748,217
100.0
%
$
258,602,810
100.0
%
$
40,145,407
15.5
%
Total cost of revenues increased by $24.1 million to $115.7 million for the three months ended June 30, 2026, compared to $91.6 million for the three months ended June 30, 2025. For the nine months ended June 30, 2026, total cost of revenues increased by $40.1 million to $298.7 million, compared to $258.6 million for the same period in 2025. These increases primarily reflected higher activity levels across each of the Company’s principal business lines during the three- and nine-month periods ended June 30, 2026.
Gas & Water Distribution cost of revenues was $40.2 million for the three months ended June 30, 2026, an increase of $8.3 million from $31.9 million for the prior-year period. For the nine months ended June 30, 2026, cost of revenues was $103.3 million, an increase of $17.2 million from $86.0 million for the same period in 2025. These increases were primarily due to increased water distribution construction activity during the 2026 periods.
Gas & Petroleum Transmission cost of revenues was $21.2 million for the three months ended June 30, 2026, an increase of $7.0 million from $14.2 million for the prior-year period. For the nine months ended June 30, 2026, cost of revenues was $50.0 million, an increase of $13.7 million from $36.3 million for the same period in 2025. These increases were primarily due to higher construction activity on projects awarded during the first quarter of fiscal 2026, together with more favorable project timing, as most transmission work in fiscal 2025 commenced during the third fiscal quarter.
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Electrical, Mechanical, & General Construction Services cost of revenues was $53.4 million for the three months ended June 30, 2026, an increase of $8.9 million from $44.4 million for the prior-year period. For the nine months ended June 30, 2026, cost of revenues was $141.5 million, an increase of $8.6 million from $132.9 million for the same period in 2025. These increases were primarily due to increased electrical construction activity during the 2026 periods.
Unallocated shop expenses were $879,000 for the three months ended June 30, 2026, a decrease of $215,000 from $1.1 million for the prior-year period. For the nine months ended June 30, 2026, unallocated shop expenses were $3.9 million, an increase of $590,000 from $3.3 million for the same period in 2025. The decrease for the three months ended June 30, 2026 as compared to the same period in 2025 was primarily due to increased internal equipment charges to projects. The increase for the nine months ended June 30, 2026 as compared to the same period in 2025 was primarily due to higher depreciation, insurance, and equipment repair costs, without a corresponding increase in internal equipment charges to projects.
Gross Profit (Loss) . The following table compares the Company’s gross profit for the three and nine months ended June 30, 2026 to the corresponding periods in 2025:
Three Months Ended
June 30, 2026
% of revenue
June 30, 2025
% of revenue
Change
Pct.
Gas & Water Distribution
$
8,070,371
16.72
%
$
6,678,853
17.32
%
$
1,391,518
20.8
%
Gas & Petroleum Transmission
(16,789)
(0.08)
%
1,123,753
7.33
%
(1,140,540)
(101.5)
%
Electrical, Mechanical, & General
7,142,821
11.81
%
5,274,580
10.61
%
1,868,239
35.4
%
Unallocated Shop Expense
(879,178)
(1,094,588)
215,410
(19.7)
%
Total
$
14,317,225
11.0
%
$
11,982,598
11.6
%
$
2,334,627
19.5
%
Nine Months Ended
June 30, 2026
% of revenue
June 30, 2025
% of revenue
Change
% Change
Gas & Water Distribution
$
16,954,208
14.10
%
$
10,931,257
11.27
%
$
6,022,951
55.1
%
Gas & Petroleum Transmission
6,342,953
11.25
%
852,476
2.29
%
5,490,477
644.1
%
Electrical, Mechanical, & General
19,163,761
11.93
%
13,867,872
9.45
%
5,295,889
38.2
%
Unallocated Shop Expense
(3,917,569)
(3,327,565)
(590,004)
17.7
%
Total
$
38,543,353
11.4
%
$
22,324,040
7.9
%
$
16,219,313
72.7
%
Total gross profit increased by $2.3 million to $14.3 million for the three months ended June 30, 2026, compared to $12.0 million for the three months ended June 30, 2025. For the nine months ended June 30, 2026, total gross profit increased by $16.2 million to $38.5 million, compared to $22.3 million for the same period in 2025. These increases in gross profit were primarily driven by higher activity levels and generally improved project execution across the Company’s principal business lines during the three- and nine-month periods ended June 30, 2026. The increase in gross profit for the three-month period was partially offset by lower margins on a large project within the Gas & Petroleum Transmission business line.
Gas & Water Distribution gross profit was $8.1 million for the three months ended June 30, 2026, an increase of $1.4 million from $6.7 million for the prior-year period. The increase in gross profit for the three-month period primarily reflected higher water distribution construction activity but was partially offset by a slight decline in project profitability. For the nine months ended June 30, 2026, gross profit was $17.0 million, an increase of $6.0 million from $10.9 million for the same period in 2025. The increase in gross profit for the nine-month period primarily reflected higher water distribution construction activity and improved project profitability.
Gas & Petroleum Transmission gross profit was a gross loss of $17,000 for the three months ended June 30, 2026, compared to gross profit of $1.1 million for the prior-year period. The decline in gross profit for the three-month period primarily reflected lower margins on one large transmission project, partially offset by increased construction activity on transmission projects awarded during the first and second quarters of fiscal 2026. For the nine months ended June 30, 2026, gross profit was $6.3 million, an increase of $5.5 million from $852,000 for the same period in 2025. The increase in gross profit for the nine-month period primarily reflected higher construction activity on transmission projects awarded during the first and second quarters of fiscal 2026, together with improved project execution and profitability.
Electrical, Mechanical, & General Construction Services gross profit was $7.1 million for the three months ended June 30, 2026, an increase of $1.9 million from $5.3 million for the prior-year period. The increase in gross profit for the three-month period primarily reflected improved project margins and favorable project execution despite relatively consistent levels of construction activity. For the nine months ended June 30, 2026, gross profit was $19.2 million, an increase of $5.3 million from $13.9 million for the same
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period in 2025. The increase in gross profit for the nine-month period primarily reflected improved project margins, favorable project execution, and a more profitable mix of work performed during fiscal 2026.
Unallocated shop gross loss was $879,000 for the three months ended June 30, 2026, compared to $1.1 million for the prior-year period. The improvement in gross loss for the three-month period was primarily due to increased internal equipment charges allocated to projects, which more than offset higher depreciation, insurance, and equipment repair costs. For the nine months ended June 30, 2026, unallocated shop gross loss was $3.9 million, compared to $3.3 million for the same period in 2025. The increase in gross loss for the nine-month period primarily reflected higher depreciation, insurance, and equipment repair costs, which were only partially offset by internal equipment charges allocated to projects.
Selling and administrative expenses . Total selling and administrative expenses increased by $875,000 to $9.7 million for the three months ended June 30, 2026, compared to $8.8 million for the same period in 2025. For the nine months ended June 30, 2026, total selling and administrative expenses increased by $2.3 million to $27.9 million, compared to $25.6 million for the same period in 2025. These increases were primarily attributable to higher labor and related burden costs associated with the Company’s growth. Selling and administrative expenses increased at a slower rate than revenues during both periods, reflecting improved operating leverage as the Company expanded its operations.
Other non-operating expense . Other non-operating expenses were $118,000 for the three months ended June 30, 2026, compared to $39,000 for the same period in 2025. For the nine months ended June 30, 2026, other non-operating expenses were $315,000, compared to $107,000 for the same period in 2025. The increases primarily reflected amortization of intangible assets associated with the acquisition completed on September 30, 2025.
Interest expense . Interest expense was $487,000 for the three months ended June 30, 2026, a decrease of $294,000 from $781,000 for the same period in 2025. For the nine months ended June 30, 2026, interest expense was $2.1 million, a decrease of $42,000 from $2.1 million for the same period in 2025. These decreases primarily reflected lower average borrowings under the Company’s line of credit and the repayment of other long-term debt using proceeds from the February 2026 equity offering.
Gain (loss) on sale of equipment . Gain on sale of equipment was $5,000 for the three months ended June 30, 2026, compared to a loss of $129,000 for the same period in the prior year. For the nine months ended June 30, 2026, gain on sale of equipment was $94,000, an increase of $43,000 from $51,000 for the same period in the prior year. The Company periodically sells underutilized or non-operating equipment as part of its asset management practices. Accordingly, gains and losses on such sales may fluctuate from period to period based on the timing of equipment dispositions and the carrying value of the assets sold.
Income (loss) before income taxes . Income before income taxes was $4.0 million for the three months ended June 30, 2026, compared to $2.2 million for the same period in the prior year. For the nine months ended June 30, 2026, income before income taxes was $8.3 million, compared to a loss before income taxes of $5.5 million for the same period in the prior year. These improvements primarily reflected higher revenues, improved project profitability, and lower interest expense during the 2026 periods.
Income tax expense (benefit) . Income tax expense was $745,000 for the three months ended June 30, 2026, compared to $138,000 for the same period in the prior year. For the nine months ended June 30, 2026, income tax expense was $2.1 million, compared to an income tax benefit of $1.6 million for the same period in the prior year. The increase in income tax expense primarily reflected higher pre-tax income during the 2026 periods. Income tax expense (benefit) represents management’s estimate based on the Company’s projected annual effective income tax rate and may vary from period to period due to changes in pre-tax income, permanent differences, discrete tax items, and other factors affecting the annual effective tax rate.
Net income (loss). Net income was $3.3 million for the three months ended June 30, 2026, compared to $2.1 million for the same period in the prior year. For the nine months ended June 30, 2026, net income was $6.2 million, compared to a net loss of $3.9 million for the same period in the prior year. The improvements in net income primarily reflected higher revenues, improved gross profit, and lower interest expense during the 2026 periods.
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Segment Results
The following table sets forth segment revenues, segment income (loss) from operations and operating margins for the periods indicated, as well as the dollar and percentage change from the prior period:
Three Months Ended June 30, 2026
Underground
Infrastructure
Industrial
Building
Construction
Construction
Construction
Total
Revenues
$
71,439,367
$
44,677,594
$
13,888,967
$
130,005,928
Segment direct operating expenses (excluding depreciation)
61,342,374
38,654,003
12,442,374
112,438,751
Direct depreciation expense
2,579,382
670,570
—
3,249,952
Segment gross profit
7,517,611
5,353,021
1,446,593
14,317,225
Segment gross profit percentage
10.5
%
12.0
%
10.4
%
11.0
%
Selling, general, and administrative expenses
5,513,469
1,160,147
960,531
7,634,147
Indirect depreciation expense
—
—
112,640
112,640
Intangible asset amortization expenses
311,547
54,720
—
366,267
Segment indirect operating expenses
5,825,016
1,214,867
1,073,171
8,113,054
Segment income from operations
1,692,595
4,138,154
373,422
6,204,171
Segment operating margin percentage
2.4
%
9.3
%
2.7
%
4.8
%
Corporate and non-allocated costs
1,567,530
Corporate depreciation expense
4,721
Total consolidated income from operations
$
4,631,920
Variance Between Three Months Ended June 30, 2026 and 2025
Underground
Infrastructure
Industrial
Building
Construction
Construction
Construction
Total
Revenues
$
16,055,060
$
9,632,869
$
716,414
$
26,404,343
Segment direct operating expenses (excluding depreciation)
15,462,707
7,260,624
1,131,802
23,855,133
Direct depreciation expense
169,333
45,250
—
214,583
Segment gross profit
423,020
2,326,995
(415,388)
2,334,627
Segment gross profit percentage
2.6
%
24.2
%
(58.0)
%
8.8
%
Selling, general, and administrative expenses
(17,504)
130,416
246,558
359,470
Indirect depreciation expense
—
—
22,211
22,211
Intangible asset amortization expenses
136,735
36,558
—
173,293
Segment indirect operating expenses
119,231
166,974
268,769
554,974
Segment income from operations
303,789
2,160,021
(684,157)
1,779,653
Segment operating margin percentage
1.9
%
22.4
%
(95.5)
%
6.7
%
Corporate and non-allocated costs
312,482
Corporate depreciation expense
3,304
Total consolidated income from operations
$
1,463,867
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Table of Contents
Nine Months Ended June 30, 2026
Underground
Infrastructure
Industrial
Building
Construction
Construction
Construction
Total
Revenues
$
186,885,975
$
114,821,093
$
35,584,502
$
337,291,570
Segment direct operating expenses (excluding depreciation)
157,591,501
99,801,182
31,611,363
289,004,046
Direct depreciation expense
7,766,653
1,977,518
—
9,744,171
Segment gross profit
21,527,821
13,042,393
3,973,139
38,543,353
Segment gross profit percentage
11.5
%
11.4
%
11.2
%
11.4
%
Selling, general, and administrative expenses
15,449,819
3,295,886
3,062,012
21,807,717
Indirect depreciation expense
—
—
337,914
337,914
Intangible asset amortization expenses
898,002
164,160
—
1,062,162
Segment indirect operating expenses
16,347,821
3,460,046
3,399,926
23,207,793
Segment income from operations
$
5,180,000
$
9,582,347
$
573,213
$
15,335,560
Segment operating margin percentage
2.8
%
8.3
%
1.6
%
4.5
%
Corporate and non-allocated costs
4,722,470
Corporate depreciation expense
9,994
Total consolidated income from operations
$
10,603,096
Variance Between Nine Months Ended June 30, 2026 and 2025
Underground
Infrastructure
Industrial
Building
Construction
Construction
Construction
Total
Revenues
$
46,137,023
$
11,685,523
$
(1,457,826)
$
56,364,720
Segment direct operating expenses (excluding depreciation)
32,193,692
7,191,284
(532,925)
38,852,051
Direct depreciation expense
1,215,125
78,231
—
1,293,356
Segment gross profit
12,728,206
4,416,008
(924,901)
16,219,313
Segment gross profit percentage
27.6
%
37.8
%
63.4
%
28.8
%
Selling, general, and administrative expenses
379,361
301,997
770,418
1,451,776
Indirect depreciation expense
—
—
80,046
80,046
Intangible asset amortization expenses
456,905
145,998
—
602,903
Segment indirect operating expenses
836,266
447,995
850,464
2,134,725
Segment income from operations
11,891,940
3,968,013
(1,775,365)
14,084,588
Segment operating margin percentage
25.8
%
34.0
%
121.8
%
25.0
%
Corporate and non-allocated costs
198,047
Corporate depreciation expense
5,232
Total consolidated income from operations
$
13,881,309
33
Table of Contents
Underground Infrastructure Construction
Revenues. Revenues increased by $16.1 million and $46.1 million for the three and nine months ended June 30, 2026, respectively, compared to the same periods in 2025. The increases primarily reflected higher construction activity within the Company’s natural gas and water distribution business lines, together with the earlier commencement of natural gas transmission projects during fiscal 2026.
Income from operations. Income from operations increased by $304,000 and $11.9 million for the three and nine months ended June 30, 2026, respectively, compared to the same periods in 2025. The increases primarily reflected higher construction activity, together with improved project execution across the Company’s underground infrastructure operations.
Industrial Construction
Revenues. Revenues increased by $9.6 million and $11.7 million for the three and nine months ended June 30, 2026, respectively, compared to the same periods in 2025. The increases primarily reflected higher levels of electrical and mechanical construction activity.
Income from operations. Income from operations increased by $2.2 million and $4.0 million for the three and nine months ended June 30, 2026, respectively, compared to the same periods in 2025. The increases primarily reflected improved project execution, higher project margins, and a more profitable mix of electrical and mechanical construction work.
Building Construction
Revenues. Revenues increased by $716,000 for the three months ended June 30, 2026, compared to the same period in 2025, and decreased by $1.5 million for the nine months ended June 30, 2026, compared to the same period in 2025. The quarterly increase primarily reflected the timing of construction activity on active projects, while the year-to-date decrease primarily reflected the completion of several significant projects during fiscal 2025 and lower construction activity as newly awarded projects transitioned into active construction during fiscal 2026.
Income from operations. Income from operations decreased by $684,000 and $1.8 million for the three and nine months ended June 30, 2026, respectively, compared to the same periods in 2025. The decreases primarily reflected lower project profitability and reduced absorption of fixed operating costs as newly awarded projects transitioned into active construction during fiscal 2026.
Corporate and Non-Allocated Costs
Corporate and non-allocated costs increased by $320,000 and $205,000 for the three and nine months ended June 30, 2026, respectively, compared to the same periods in 2025. The increases primarily reflected additional personnel costs associated with the expansion of the Company’s corporate safety and risk management functions, partially offset by normal fluctuations in other corporate overhead costs.
The Company’s disaggregated revenue presentation differs slightly from its reportable segment presentation because the Industrial Construction and Building Construction reportable segments are combined within the Electrical, Mechanical and General revenue category. In addition, one legal entity within the Underground Infrastructure Construction reportable segment performs certain services that are classified within the Electrical, Mechanical and General revenue category. These differences are not material to the Company’s reportable segment results.
Comparison of Financial Condition at June 30, 2026 and September 30, 2025
Total assets increased to $219.5 million at June 30, 2026 from $215.2 million at September 30, 2025. The increase primarily reflected higher contract assets, retainage receivable, cash and cash equivalents, and prepaid expenses, partially offset by lower accounts receivable and the amortization of intangible assets.
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Table of Contents
Working capital remained strong at June 30, 2026. Accounts receivable, net of the allowance for doubtful accounts, decreased $11.4 million to $64.6 million, primarily reflecting the timing of customer collections and project billings. Contract assets increased $9.4 million to $43.9 million, primarily reflecting the timing of revenue recognized in excess of billings on construction contracts as projects progressed during the period. Retainage receivable increased $2.9 million to $18.9 million, consistent with the Company’s level of construction activity and the timing of retainage billings.
The Company continued to invest in its operating platform during the period. Capital expenditures totaled approximately $7.6 million, primarily for construction equipment, while net property and equipment remained relatively consistent as depreciation substantially offset these investments.
The Company further strengthened its balance sheet through significant debt reduction. Current and long-term debt, excluding lines of credit and short-term borrowings, decreased $26.9 million to $34.9 million at June 30, 2026, primarily reflecting principal repayments during the period. Total liabilities decreased $20.5 million to $135.4 million, while shareholders’ equity increased $24.8 million to $84.1 million, primarily reflecting the February 2026 equity offering and net income generated during the period.
Overall, the Company believes its balance sheet remains well positioned to support ongoing operations, capital investment, and future growth opportunities.
Liquidity and Capital Resources
The Company’s primary sources of liquidity include cash generated from operations, borrowings available under its revolving credit facility, equipment financing arrangements and access to the capital markets. Primary uses of liquidity include funding working capital, capital expenditures, strategic acquisitions, debt service, dividend payments and share repurchases. Management believes that cash generated from operations, together with existing cash balances and available borrowings under its revolving credit facility, will be sufficient to fund the Company’s anticipated operating, investing and financing requirements for at least the next twelve months. Working capital requirements are significantly influenced by the timing of project billings, customer collections, subcontractor and supplier payments, and contract retainage balances.
Cash Flows
Net cash provided by operating activities for the nine months ended June 30, 2026 was $19.5 million, reflecting earnings from operations, partially offset by changes in working capital associated with the timing of customer billings, collections and payments to suppliers and subcontractors. The $7.1 million net cash used in investing activities primarily reflected purchases of construction equipment and fleet assets. Net cash used in financing activities of $10.0 million primarily reflected repayments of borrowings under the Company’s revolving credit facility and other debt obligations, dividend payments and share repurchases, partially offset by the net proceeds from the February 2026 equity offering.
Revolving Credit Facility
Effective June 28, 2026, the Company renewed its $30.0 million revolving credit facility with a maturity date of June 28, 2028. At June 30, 2026, borrowings outstanding under the facility totaled $12.3 million, compared to $24.8 million at September 30, 2025. Based on the borrowing base calculation, approximately $9.7 million remained available under the facility at June 30, 2026. The revolving credit facility contains customary financial covenants, including a minimum Fixed Charge Coverage Ratio and a maximum Senior Funded Debt to EBITDA ratio, with which the Company was in compliance as of June 30, 2026. Management expects to remain in compliance with these covenants over the next twelve months. The available borrowing capacity under the revolving credit facility provides the Company with an important source of liquidity and financial flexibility.
Equity Offering
On February 20, 2026, the Company completed an underwritten public offering of 1,740,000 shares of common stock at a public offering price of $11.50 per share, generating net proceeds of approximately $18.4 million after underwriting discounts, commissions and offering expenses. On February 24, 2026, the underwriter exercised its over-allotment option to purchase an additional 261,000 shares, providing approximately $2.8 million of additional net proceeds before certain offering expenses. The Company used or expects to use the net proceeds to fund strategic growth initiatives, working capital requirements and general corporate purposes.
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Table of Contents
Debt and Capital Resources
During the nine months ended June 30, 2026, the Company continued to reduce outstanding indebtedness through scheduled principal repayments while investing in equipment to support future growth. Management believes its capital structure provides sufficient financial flexibility to fund ongoing operations, capital expenditures, strategic growth opportunities and working capital requirements. Capital expenditures during the period primarily consisted of investments in construction equipment and fleet assets. Management expects future capital expenditures to remain focused on equipment replacement, fleet modernization and selective investments that improve operational efficiency. Additional information regarding the Company’s debt arrangements and lease obligations is included in the accompanying Notes 13 and 16, respectively, to the consolidated financial statements.
Paycheck Protection Program Loans
As previously disclosed, the U.S. Small Business Administration (“SBA”) continues to review the Company’s previously forgiven Paycheck Protection Program (“PPP”) loans. Pending final resolution of the matter, the Company has recorded a liability for the full amount of the PPP loans together with accrued interest. Although the timing and outcome of the SBA’s review remain uncertain, management continues to cooperate fully with the SBA and believes it has responded to all requests for information. Any determination requiring repayment of the PPP loans or the assessment of penalties could adversely affect the Company’s financial condition, results of operations and cash flows. Additional information is included in Note 3 to the accompanying consolidated financial statements.
Capital Allocation
The Company’s capital allocation strategy is designed to maintain financial flexibility while investing in long-term growth and enhancing shareholder value. Management’s priorities include funding organic growth opportunities, investing in equipment and technology, pursuing strategic acquisitions, reducing leverage when appropriate, and returning capital to shareholders through dividends and opportunistic share repurchases. Management regularly evaluates these priorities in light of market conditions, liquidity requirements and opportunities to enhance long-term shareholder value.
Off-Balance Sheet Arrangements
The Company enters into certain off-balance sheet arrangements in the ordinary course of business that are customary within the construction industry. Management does not believe these arrangements are reasonably likely to have a material effect on the Company’s financial condition, results of operations, liquidity, capital expenditures or capital resources. These arrangements include the following:
Letters of Credit
Certain customers or vendors may require the Company to provide letters of credit to secure contractual obligations or payments to subcontractors and vendors on various projects. At June 30, 2026, the Company had no letters of credit outstanding.
Performance Bonds
Certain customers, particularly governmental agencies and new customers, require the Company to obtain bid, performance and payment bonds in connection with construction contracts. These bonds are issued by surety companies and guarantee the Company’s performance under its contracts and payment of subcontractors and suppliers. If the Company fails to perform or satisfy its payment obligations, the surety may be required to make payments under the bond, and the Company would be obligated to reimburse the surety for any amounts paid.
The Company maintains a bonding program with a national surety provider that management believes is sufficient to support its current operations. Depending on the size and terms of future contracts, the Company may be required to provide letters of credit or other collateral to support its bonding capacity, which could reduce available borrowing capacity. Management does not anticipate any material claims against its surety program. At June 30, 2026, the Company had approximately $107.9 million of performance bonds outstanding.
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Table of Contents
Concentration of Credit Risk
In the ordinary course of business, the Company extends credit to customers under customary payment terms, generally without requiring collateral. The Company’s customers primarily consist of natural gas and oil companies, utilities, general contractors, and commercial and industrial customers located throughout the United States. As a result, the Company is exposed to credit risk associated with the financial condition of these customers and general economic conditions affecting the industries in which they operate.
The Company manages its credit risk through ongoing evaluation of customer creditworthiness, active monitoring of outstanding receivable balances, and collection efforts. In addition, the Company generally has statutory lien rights related to services performed. Under certain circumstances, such as foreclosure proceedings, the Company may obtain title to underlying assets in satisfaction of outstanding receivable balances.
Please see the tables below for customers that represent 10.0% or more of the Company’s revenue for the three and nine months ended June 30, 2026 and 2025:
Three Months Ended
Three Months Ended
Nine Months Ended
Nine Months Ended
June 30,
June 30,
June 30,
June 30,
Revenue
2026
2025
2026
2025
NiSource and subsidiaries
13.8
%
*
11.3
%
*
American Water
*
12.1
%
*
11.3
%
All other
86.2
%
87.9
%
88.7
%
88.7
%
Total
100.0
%
100.0
%
100.0
%
100.0
%
* Less than 10.0% and included in “All other” if applicable
Please see the tables below for customers that represent 10.0% or more of the Company’s accounts receivable, net of retention at June 30, 2026 and September 30, 2025:
Accounts receivable, net of retention
at June 30, 2026
at September 30, 2025
TransCanada Corporation
*
13.9
%
All other
100.0
%
86.1
%
Total
100.0
%
100.0
%
* Less than 10.0% and included in “All other” if applicable
Litigation
On November 12, 2021, the Company received a withdrawal liability claim from a pension plan to which the Company made pension contributions for union construction employees performing covered work in a particular jurisdiction. The Company has not performed covered work in their jurisdiction since 2011; however, the Company disagrees with the withdrawal claim and believes it is covered by an exemption under federal law. The demand called for thirty-four quarterly installment payments of $41,000 starting March 15, 2021. The Company complied with the demand according to federal pension law; however, the Company firmly believes no withdrawal liability exists. The Company is in negotiations with the pension fund to resolve the matter and all future payments have been suspended as part of the negotiation. The Company has expensed all $164,000 in payments made through September 30, 2022 and does not expect any future liabilities related to this claim. The Company did not make any payments during the three and nine months ended June 30, 2026 or 2025.
Other than described above, at June 30, 2026, the Company was not involved in any legal proceedings other than in the ordinary course of business. The Company is a party from time to time to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. These actions typically seek, among other things, compensation for alleged personal injury, breach of contract and/or property damages, punitive damages, civil penalties, or other losses, or injunctive or declaratory relief. With respect to all such lawsuits, claims, and proceedings, we record reserves when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. At June 30, 2026, the Company does not believe that any of these proceedings, separately or in aggregate, would be expected to have a material adverse effect on our financial position, results of operations or cash flows.
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Table of Contents
Related Party Transactions
We intend that all transactions between us and our executive officers, directors, holders of 10% or more of the shares of any class of our common stock and affiliates thereof, will be on terms no less favorable than those terms given to unaffiliated third parties and will be approved by a majority of our independent outside directors not having any interest in the transaction.
On April 29, 2022, the Company entered into a $1.0 million promissory note agreement with Corns Enterprises as partial consideration for the purchase of Tri-State Paving. This four-year agreement requires $250,000 principal installment payments on or before the end of each twelve (12) full calendar month period beginning April 29, 2022. Interest payments due will be calculated on the principal balance remaining and will be at the stated rate of 3.5% per year. The Company has made $750,000 in principal payments on this note as of June 30, 2026. Final payment on this note was made in April 2026.
SQP made an equity investment of $156,000 in 1030 Quarrier Development, LLC (“Development”) in August 2022. Development is a variable interest entity (“VIE”) that is 75% owned by 1030 Quarrier Ventures, LLC (“Ventures”) and 25% owned by SQP. SQP is not the primary beneficiary of the VIE and therefore will not consolidate Development into its consolidated financial statements. Instead, SQP will apply the equity method of accounting for its investment in Development. Development, a 1% owner, and United Bank, a 99% owner, formed 1030 Quarrier Landlord, LLC (“Landlord”). Landlord decided to pursue the following development project (the “Project”): a historical building at 1030 Quarrier Street, Charleston, West Virginia as well as associated land (the “Property”) was purchased to be developed/rehabilitated into a commercial project including apartments and commercial space. Upon the completion of development, the Property will be used to generate rental income. SQP has been awarded the construction contract for the Project. United Bank provided $5.0 million in loans to fund the Project. SQP and Ventures have jointly provided an unconditional guarantee for the $5.0 million of obligations associated with the Project.
CJ Hughes entered into an agreement, cancelable at any time, with Construction Specialty Services (“CSS”), which is owned by Chuck Austin, the President of CJ Hughes. CSS rents equipment, periodically, to and as requested by CJ Hughes. The equipment rental rates are below the rates that the equipment can be rented from any unaffiliated rental company. CJ Hughes is not obliged to rent any equipment and does so only when CJ Hughes does not have equipment available of its own and would otherwise need to rent such equipment as the demand increases throughout the construction season. For the three months ended June 30, 2026 and 2025, the rental amounts for these specific periods were $111,000, and $74,000, respectively. For the nine months ended June 30, 2026 and 2025, the rental amounts for these specific periods were $329,000, and $250,000, respectively.
Other than mentioned above, there were no new material related party transactions entered into during the three and nine months ended June 30, 2026.
Certain Energy Services subsidiaries routinely engage in transactions in the normal course of business with each other, including sharing employee benefit plan coverage, payment for insurance and other expenses on behalf of other affiliates, and other services incidental to business of each of the affiliates. All revenue and related expense transactions, as well as the related accounts payable and accounts receivable have been eliminated in consolidation.
Inflation
Most significant project materials, such as pipe or electrical wire, are provided by the Company’s customers. When possible, the Company attempts to lock in pricing with vendors and include qualifications regarding material cost increases in bids. Where allowed by contract, the Company will address fuel cost increases with customers. Significant inflation or supply chain issues could cause customers to delay or cancel planned projects; however, inflation did not have a significant effect on our results for the three and nine months ended June 30, 2026 and 2025.
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Table of Contents
Critical Accounting Estimates
The discussion and analysis of the Company’s financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these 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 at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting period. We evaluate our estimates on an ongoing basis, based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. There can be no assurance that actual results will not differ from those estimates. Management believes the following accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.
Revenues
The Company recognizes revenue as performance obligations are satisfied and control of the promised goods and service is transferred to the customer. For Lump Sum and Unit Price contracts, revenue is ordinarily recognized over time as control is transferred to the customers by measuring the progress toward complete satisfaction of the performance obligation(s) using an input (i.e., “cost to cost”) method. For Cost Plus and Time and Material (“T&M”) contracts, revenue is ordinarily recognized over time as control is transferred to the customers by measuring the progress toward satisfaction of the performance obligation(s) using an output method.
The accuracy of our revenue and profit recognition in a given period depends on the accuracy of our estimates of the cost to complete each project. We believe our experience allows us to create materially reliable estimates. There are a number of factors that can contribute to changes in estimates of contract cost and profitability. The most significant of these include:
● the completeness and accuracy of the original bid;
● costs associated with scope changes;
● changes in costs of labor and/or materials;
● extended overhead and other costs due to owner, weather and other delays;
● subcontractor performance issues;
● changes in productivity expectations;
● site conditions that differ from those assumed in the original bid;
● changes from original design on design-build projects;
● the availability and skill level of workers in the geographic location of the project;
● a change in the availability and proximity of equipment and materials;
● our ability to fully and promptly recover on affirmative claims and back charges for additional contract costs; and
● the customer’s ability to properly administer the contract.
The foregoing factors, as well as the stage of completion of contracts in process and the mix of contracts at different margins may cause fluctuations in gross profit from period to period. Significant changes in cost estimates, particularly in our larger, more complex projects could have a significant effect on our profitability.
Our contract assets include cost and estimated earnings in excess of billings that represent amounts earned and reimbursable under contracts, including claim recovery estimates, but have a conditional right for billing and payment such as achievement of milestones or completion of the project. With the exception of customer affirmative claims, generally, such unbilled amounts will become billable according to the contract terms and generally will be billed and collected over the next three months. Settlement with the customer of outstanding affirmative claims is dependent on the claims resolution process and could extend beyond one year. Based on our historical experience, we generally consider the collection risk related to billable amounts to be low. When events or conditions indicate that it is probable that the amounts outstanding become unbillable, the transaction price and associated contract asset is reduced.
Our contract liabilities consist of provisions for losses and billings in excess of costs and estimated earnings. Provisions for losses are recognized in the consolidated statements of income at the uncompleted performance obligation level for the amount of total estimated losses in the period that evidence indicates that the estimated total cost of a performance obligation exceeds its estimated total revenue. Billings in excess of costs and estimated earnings are billings to customers on contracts in advance of work performed, including advance payments negotiated as a contract condition. Generally, unearned project-related costs will be earned over the next twelve months.
39
Table of Contents
The following table presents our costs and estimated earnings in excess of billings and billings in excess of costs and estimated earnings at June 30, 2026 and September 30, 2025:
June 30, 2026
September 30, 2025
Costs incurred on contracts in progress
$
565,061,543
$
471,208,654
Estimated earnings, net of estimated losses
99,663,389
71,159,322
664,724,932
542,367,976
Less billings to date
647,990,300
536,231,730
$
16,734,632
$
6,136,246
Costs and estimated earnings in excess of billed on uncompleted contracts
$
43,901,138
$
34,455,011
Less billings in excess of costs and estimated earnings on uncompleted contracts
27,166,506
28,318,765
$
16,734,632
$
6,136,246
Allowance for credit losses
The Company provides an allowance for credit losses when collection of an account is considered doubtful. Inherent in the assessment of the allowance for credit losses are certain judgments and estimates relating to, among others, our customers’ access to capital, our customers’ willingness or ability to pay, general economic conditions and the ongoing relationship with the customers. While most of our customers are large well capitalized companies, should they experience material changes in their revenues and cash flows or incur other difficulties and not be able to pay the amounts owed, this could cause reduced cash flows and losses in excess of our current reserves.
Materially incorrect estimates of bad debt reserves could result in an unexpected loss in profitability for the Company. Additionally, frequently changing reserves could be an indication of risky or unreliable customers. At June 30, 2026, the management review deemed that the allowance for credit losses was adequate.
Please see the allowance for credit losses table below as of and for the nine months ended June 30, 2026 and as of fiscal year ended September 30, 2025:
June 30, 2026
September 30, 2025
Balance at beginning of period
$
521,616
$
738,526
Charged to expense
—
423,750
Deductions for uncollectible receivables written off, net of recoveries
(61,593)
(640,660)
Balance at end of period
$
458,023
$
521,616
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Table of Contents
Impairment of goodwill and intangible assets
The Company follows the guidance of Accounting Standards Codification (“ASC”) 350-20-35-3 “Intangibles-Goodwill and Other (Topic 350)” which requires a company to record an impairment charge based on the excess of a reporting unit’s carrying amount of goodwill over its fair value. Under the current guidance, companies can first choose to assess any impairment based on qualitative factors (Step 0). If a company fails this test or decides to bypass this step, it must proceed with a quantitative assessment of goodwill impairment. The Company did not have a goodwill impairment at June 30, 2026.
Materially incorrect estimates could cause an impairment of goodwill or intangible assets and result in a loss in profitability for the Company.
A table of the Company’s intangible assets subject to amortization at June 30, 2026 and September 30, 2025 is below:
Accumulated
Accumulated
Amortization
Amortization
Amortization
Amortization
Remaining Life
Amortization
Amortization
and Impairment
and Impairment
and Impairment
and Impairment
(in months) at
and Impairment
and Impairment
Three Months
Three Months
Nine Months
Nine Months
Net Book Value
Net Book Value
June 30,
at June 30,
at September 30,
Ended June 30,
Ended June 30,
Ended June 30,
Ended June 30,
at June 30,
at September 30,
2026
Original Cost
2026
2025
2026
2025
2026
2025
2026
2025
Intangible assets:
West Virginia Pipeline:
Customer relationships
54
$
2,209,724
1,215,345
$
1,049,610
55,245
55,245
165,735
165,735
$
994,379
$
1,160,114
Tradename
54
263,584
144,979
125,215
6,588
6,588
19,764
19,764
118,605
138,369
Non-competes
—
83,203
83,203
83,203
—
—
—
—
—
—
Heritage Painting
Customer relationships
36
121,100
48,432
30,270
6,054
6,054
18,162
18,162
72,668
90,830
Tri-State Paving:
Customer relationships
70
1,649,159
673,407
563,463
27,486
41,229
109,944
123,687
975,752
1,085,696
Tradename
70
203,213
82,979
69,431
3,387
5,081
13,548
15,241
120,234
133,782
Non-competes
—
39,960
39,960
39,960
—
—
—
—
—
—
Tribute Contracting & Consultants
Non-compete 1
101
520,000
82,367
43,333
13,036
13,472
39,034
31,434
437,633
476,667
Non-compete 2
77
10,000
1,992
1,042
326
259
950
605
8,008
8,958
Tradename
41
80,000
25,347
13,333
4,016
2,073
12,014
4,836
54,653
66,667
Backlog
5
1,320,000
1,044,932
550,000
164,932
34,198
494,932
79,795
275,068
770,000
Rigney Digital Systems
Tradename
123
657,100
44,802
—
14,934
—
44,802
—
612,298
657,100
Backlog
15
260,600
97,722
—
32,574
—
97,722
—
162,878
260,600
Non-compete
111
46,300
3,474
—
1,158
—
3,474
—
42,826
46,300
Total intangible assets
$
7,463,943
$
3,588,941
$
2,568,860
$
329,736
$
164,199
$
1,020,081
$
459,259
$
3,875,002
$
4,895,083
Depreciation and Amortization
The purpose of depreciation and amortization is to represent an accurate value of assets on the books. Every year, as assets are used, their values are reduced on the balance sheet and expensed on the income statement. As depreciation and amortization are a noncash expense, the amount must be estimated. Each year a certain amount of depreciation and amortization is written off and the book value of the asset is reduced.
Property and equipment are recorded at cost. Costs which extend the useful lives or increase the productivity of the assets are capitalized, while normal repairs and maintenance that do not extend the useful life or increase productivity of the asset are expensed as incurred. Property and equipment are depreciated principally on the straight-line method over the estimated useful lives of the assets: buildings 39 years; operating equipment and vehicles 5-7 years; and office equipment, furniture and fixtures 5-7 years.
Acquired intangible assets subject to amortization are amortized on a straight-line basis, which approximates the pattern in which the economic benefit of the respective intangible assets is realized, over their respective estimated useful lives. The definite-lived identifiable intangible assets recognized as part of the Company’s business combinations are initially recorded at their estimated fair value.
The Company’s depreciation expenses for the three months ended June 30, 2026 and 2025 were $3.4 million and $3.1 million, respectively. The Company’s depreciation expenses for the nine months ended June 30, 2026 and 2025 were $10.1 million and $8.7 million, respectively In general, depreciation is included in “cost of revenues” on the Company’s consolidated statements of income.
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The Company’s amortization expenses for the three months ended June 30, 2026 and 2025 were $329,736 and $164,199, respectively. The Company’s amortization expenses for the nine months ended June 30, 2026 and 2025 were $1,020,081 and $459,259, respectively. In general, amortization is included in “cost of revenues” on the Company’s consolidated statements of income.
Materially incorrect estimates of depreciation and amortization and/or the useful lives of assets could significantly impact the value of long-lived assets on the Company’s consolidated financial statements. A material overvaluation could result in impairment charges and reduced profitability for the Company.
Income Taxes
The Company’s income tax expense and deferred tax assets and liabilities reflect management’s best estimate of current and future taxes to be paid. Significant judgments and estimates are required in the determination of the consolidated income tax expense. The Company’s provision for income taxes is computed by applying a federal rate of 21.0% and a blended state rate of approximately 5.0% to 6.0% to taxable income or loss after consideration of non-taxable and non-deductible items.
The effective income tax rate for the three months ended June 30, 2026 was 18.5%, as compared to 6.2%, for the same period in 2025. The effective income tax rate for the nine months ended June 30, 2026 was 25.1%, as compared to 29.5%, for the same period in 2025. Effective income tax rates are estimates and may vary from period to period due to changes in the amount of taxable income and non-deductible expenses.
Major items that can affect the effective tax rate include amortization of goodwill and intangible assets and non-deductible amounts for per diem expenses.
Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements, which will result in taxable or deductible amounts in the future. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized.
The Company had $688,000 and $6.9 million of federal net operating loss carryforwards at June 30, 2026 and September 30, 2025, respectively. The Company had $31.9 million and $41.9 million of state net operating loss carryforwards at June 30, 2026 and September 30, 2025, respectively. The state net operating loss carryforwards begin to expire in 2026.
The Company does not believe that it has any unrecognized tax benefits included in its consolidated financial statements that require recognition. The Company has not had any settlements in the current period with taxing authorities, nor has it recognized tax benefits as a result of a lapse of the applicable statute of limitations. The Company recognizes interest and penalties accrued related to unrecognized tax benefits, if applicable, in general and administrative expenses.
Accounting for PPP Loans
The Company’s accounting for PPP loans reflects management’s best estimate of current and future amounts to be paid. The Company applies significant judgment regarding the determination of PPP loan forgiveness based on the rules established, and subsequently clarified by the SBA, including rules related to the Company’s affiliations and meeting SBA size standards.
Refer to Note 3 “Accounting for PPP Loans” in the accompanying consolidated financial statements for additional details.
New Accounting Pronouncements
In November 2024, the FASB issued an update that requires incremental disclosures about specific expense categories. Entities are required to disclose in the notes to financial statements the amounts of purchases of inventory, employee compensation, depreciation, intangible asset amortization and selling expenses included in each relevant expense caption of the statements of operations. The standard also requires disclosure of the amount, and a qualitative description of, other items remaining in relevant expense captions that are not separately disaggregated. This update is effective for fiscal years beginning after March 15, 2026, and interim periods within fiscal years beginning after March 15, 2027. Early adoption and both prospective and retrospective application are permitted. The Company is currently assessing the effect of this update.
In March 2023, the FASB issued an update that expands disclosures for tax rate reconciliation tables, primarily by requiring disaggregation of income taxes paid by jurisdiction, as well as greater disaggregation within the rate reconciliation. This update is
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effective for fiscal years beginning after March 15, 2024 and interim periods within fiscal years beginning after March 15, 2025. Early adoption and retrospective application are permitted. The Company is currently assessing the effect of this update.
Subsequent Events
On July 15, 2026, the Company paid a quarterly dividend of $0.04 per common share to shareholders of record as of June 30, 2026.
Management has evaluated all subsequent events for accounting and disclosure. There have been no other material events during the period, other than noted above, that would either impact the results reflected in the report or the Company’s results going forward.
Outlook
The following discussion contains forward-looking statements. Actual results may differ materially from those discussed below due to a number of risks and uncertainties.
The Company continues to experience a favorable bidding environment across its core markets, including water and wastewater infrastructure, natural gas transmission and distribution, and electrical, mechanical and general construction services. Management believes these markets continue to benefit from sustained public and private infrastructure investment, utility modernization initiatives, and increased industrial and commercial construction activity. The Company also continues to see opportunities in data center development and other infrastructure-related projects within its geographic footprint.
At June 30, 2026, the Company’s unaudited backlog totaled $286.6 million, compared to $280.7 million at June 30, 2025, and $259.7 million at September 30, 2025. Management believes its backlog reflects continued demand across its diversified end markets and provides meaningful visibility into near-term revenue outlook. The Company’s backlog remains well diversified across its service offerings and customer base, reducing dependence on any single project or market.
Backlog within the Company’s Gas & Water Distribution and Gas & Petroleum Transmission segments totaled $148.0 million at June 30, 2026. The Company continues to receive a healthy level of bidding opportunities in these markets and expects demand to remain supported by ongoing investment in utility infrastructure and energy transmission projects.
Backlog within the Company’s Electrical, Mechanical & General Construction Services segment totaled $138.6 million at June 30, 2026. Management continues to pursue opportunities on larger commercial, industrial and infrastructure projects and believes market conditions remain favorable.
Included in backlog at June 30, 2026 is approximately $70.0 million of recurring maintenance and blanket contract work expected to be performed over the next twelve months. Of the remaining $216.6 million of project-specific backlog, management expects approximately $200.0 million to be recognized as revenue over the next twelve months, subject to normal project execution and scheduling.
While management is encouraged by current bidding activity and backlog levels, the timing and conversion of backlog into revenue remain subject to customer funding, permitting, project scheduling, weather conditions, labor availability, supply chain factors and other risks beyond the Company’s control. Accordingly, there can be no assurance that anticipated projects will be awarded, proceed as scheduled, or ultimately be completed on expected timelines.
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ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
Not required for a smaller reporting company.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.