What changed in this filing

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Item 1. Business

2022-12-06 compared with 2021-12-03 · 47 added, 43 removed, 259 unchanged (26% of the section changed)

IES Holdings, Inc.

designs and installs integrated electrical and technology systems and provides infrastructure products and services to a variety of end markets.

Our operations are organized into four principal business segments, based upon the nature of our services:

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

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.

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• strong cash flow characteristics.

We believe that acquisitions provide an opportunity to expand into new or related services, products, end markets or geographic areas and diversify our revenue and profit streams, which we expect will allow us to maximize the value of our significant net operating loss tax carry forwards (“NOLs”).

We believe that acquisitions provide an opportunity to expand into new or related services, products, end markets or geographic areas and diversify our revenue and profit streams.

While we may use acquisitions to build our presence in the industries we serve, we will also consider potential acquisitions in other industries, which could result in changes in our operations from those historically conducted by us.

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The Company’s reportable segments consist of the consolidated business segments identified above, which offer different services and are managed separately.

The table below describes the percentage of our total revenues attributable to each of our four segments over each of the last three years (percentage columns may not add due to rounding):

The table below describes the percentage of our total revenues attributable to each of our four segments over

each of the last three years (percentage columns may not add due to rounding):

Year Ended September 30,

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Industry Overview

Our Communications segment is driven by demand increases for computing and storage resources as a result of technology advancements and obsolescence and changes in data consumption patterns.

Growth in the data center market remains strong, and the need for structured cabling services for applications such as data centers and distribution centers is growing rapidly.

Our Communications segment is driven by demand for computing and storage resources as a result of technology advancements and obsolescence and changes in data consumption patterns.

Demand in the data center market remains strong, and we continue to provide structured cabling services for applications such as data centers, distribution centers, and high-tech manufacturing facilities.

Additionally, we are continuing to expand our offerings in this market to broaden our customer base.

Demand has also been strong for our audio-visual and other building technology offerings.

Nevertheless, due to economic, technological and other factors, there can be no assurance that demand will continue to increase.

At September 30, 2022, our Communications business has a record level of backlog.

However, if customers in our end markets reduce their capital budgets due to economic, technological or other factors, this could result in a decrease in activity for our Communications segment.

Sales and Marketing

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Our long-term strategy is to improve our position as a preferred solutions and services provider to large national corporations and strategic local companies.

Key elements of our long-term strategy include continued investment in our employees’ technical expertise

and expansion of our on-site maintenance and recurring revenue model, as well as opportunistic acquisitions of businesses that serve our markets, consistent with our stated corporate strategy.

Key elements of our long-term strategy include continued investment in our employees’ technical expertise and expansion of our on-site maintenance and recurring revenue model, as well as opportunistic acquisitions of businesses that serve our markets, consistent with our stated corporate strategy.

Our competition consists of both large national or regional competitors and small, privately owned contractors who generally have limited access to capital.

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Although demand for both single-family and multi-family housing has increased in recent years, due to economic, technological or other factors, there can be no assurance that overall construction and demand will continue to increase in the future.

Entering fiscal 2023, we expect continued revenue growth in our multi-family business as our strong backlog is expected to offset much of he expected impact of demand weakness in the single-family market, where we typically do not enter into long-term contracts.

Sales and Marketing

Demand for our Residential services is highly dependent on the number of single-family and multi-family home starts in the markets we serve.

Although we operate in multiple states throughout the Sun-Belt, Mid-Atlantic, Northeastern and Western regions of the United States, the majority of our single-family revenues are derived from services provided in Texas and Florida.

Although we operate in multiple states, the majority of our single-family revenues are derived from services provided in Texas and Florida.

The Texas market also remains an important part of our multi-family business;

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Our volume of business may be adversely affected by declines in multi-family occupancy rates as well as single-family housing starts within our operational footprint.

Quarterly results may also be materially affected by the timing of new

construction projects.

Quarterly results may also be materially affected by the timing of new construction projects.

Accordingly, operating results for any fiscal period are not necessarily indicative of results that may be achieved for any subsequent fiscal period.

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Our construction services range from the initial planning and procurement to installation and start-up and are offered to a variety of new and remodel construction projects, ranging from the construction of office buildings and industrial facilities to transmission and distribution projects.

Our design services range from budget assistance to providing design-build and LEED

(Leadership in Energy & Environmental Design) solutions to our end customers.

Our design services range from budget assistance to providing design-build and LEED (Leadership in Energy & Environmental Design) solutions to our end customers.

Our maintenance and emergency services include critical plant shutdown, troubleshooting, emergency testing, preventative maintenance, and constant presence.

We also provide mechanical services such as maintenance agreements, installation, or replacement of mechanical equipment for commercial and industrial facilities.

We also provide

mechanical services such as maintenance agreements, installation, or replacement of mechanical equipment for commercial and industrial facilities.

This segment provides services for a variety of project types, including office buildings, manufacturing facilities, data centers, chemical plants, refineries, wind farms, solar facilities, municipal infrastructure and health care facilities.

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In general, demand for our Commercial & Industrial services is driven by construction and renovation activity levels, economic growth, and availability of bank or other financing.

The construction industry has been impacted by the ongoing COVID-19 pandemic, which has caused some customers to delay the award or start of new projects.

Although many of these delayed projects are now underway, there could be further delays in ongoing projects, or in the awarding of new projects, as a result of the pandemic.

Due to economic, technological or other factors, there can be no assurance that construction and demand will increase.

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From time to time, we are contracted on projects with completion times extending beyond one year or over several years, which are generally more complex and difficult to estimate.

With a focus on quality service offerings, our long-term strategy is to continue to be one of the preferred providers of electrical and mechanical services in the markets where we have demonstrated expertise and/or are a local market leader.

Key elements of our long-term strategy include leveraging our expertise in certain niche markets, expanding our service and maintenance business, attracting and retaining highly qualified employees, and maintaining our focus on returns on risk adjusted capital through an emphasis on reducing costs and managing working capital.

The electrical and mechanical contracting services industry is generally highly competitive and includes a number of regional or small privately-held local firms.

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Therefore, we seek to pursue projects where our access to capital and expertise provide a competitive advantage.

Industry expertise, project size, location and past performance will determine our bidding strategy, the level of involvement from competitors and our level of success in winning awards.

Industry expertise, project size, location and past performance determine our bidding strategy, the level of involvement from competitors and our level of success in bidding for new work.

Our primary advantages vary by location and market, but mostly are based upon local individual relationships with key customers or a demonstrated industry expertise.

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Delivery times are typically short for most raw materials and standard components, but during periods of peak demand, may extend to one month or more.

However, during fiscal 2021, primarily as a result of the COVID-19 pandemic and its aftermath, certain materials became more difficult to procure, and significantly more expensive, and order lead times have lengthened, as supply chain interruptions have become increasingly common.

We expect these supply challenges to continue during 2022.

In response, we are currently carrying higher levels of inventory than has historically been typical for us, and we expect to continue to do so until supply levels and delivery times normalize.

However, during fiscal 2021 and 2022, supply chain interruptions became increasingly common, primarily as a result of the COVID-19 pandemic and its aftermath.

Although supply of most raw materials has begun to normalize, we continue to experience delays in sourcing certain components.

Such delays may lead to project inefficiencies resulting from schedule extensions.

We are also exposed to increases in the prices of certain commodities.

Our strategy to reduce commodity cost exposure includes early buying of commodities for particular projects or general inventory, as well as including escalation and escape provisions in project bids, quotes and contracts wherever possible.

However, such protections may not be included in every contract or project, and in such cases, we may not be fully reimbursed for increases in commodity prices by our customers and may be exposed to commodity price volatility on longer-term projects where we have prepaid for commodities.

However, such protections are not included in every contract or project, and in such cases, we may not be fully reimbursed for increases in commodity prices by our customers and may be exposed to commodity price volatility on longer-term projects where we have prepaid for commodities.

RISK MANAGEMENT

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("Tontine Associates") and its affiliates (collectively, “Tontine”).

Based on a Form 4 filed by Tontine with the United States Securities and Exchange Commission (the “SEC”) on November 18, 2021, Tontine owned approximately 56 percent of our outstanding common stock as of December 1, 2021.

Tontine owns approximately 57 percent of our outstanding common stock based on a Form 4 filed by Tontine with the United States Securities and Exchange Commission (the "SEC") on December 3, 2021, and the Company's shares outstanding as of December 2, 2022.

As a result, Tontine can control most of our affairs, including most actions requiring the approval of shareholders, such as the approval of any potential merger or sale of all or substantially all of the Company's assets or business segments, or the Company itself.

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NET OPERATING LOSS TAX CARRYFORWARDS

The Company and certain of its subsidiaries have an estimated federal net operating loss (“NOL”) of approximately $120.2 million at September 30, 2021, including approximately $103.7 million resulting from net operating losses on which a deferred tax asset is not

Any future change in the federal statutory tax rate could impact the economic benefit of the NOLs and other deferred tax assets available to us and result in a charge or benefit to adjust the book value of the deferred tax asset recorded on our Consolidated Balance Sheets.

The Company and certain of its subsidiaries have an estimated federal net operating loss (“NOL”) of approximately $61.0 million of federal NOLs that are available to use to offset future taxable income, including approximately $55.1 million resulting from net operating losses on which a deferred tax asset is not recorded at September 30, 2022.

A change in ownership, as defined by Internal Revenue Code Section 382, could reduce the availability of NOLs for federal and state income tax purposes.

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While backlog is not a defined term under accounting principles generally accepted in the United States of America ("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.

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.

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however, there can be no assurance that this backlog will be completed within expected time frames or at all.

The increase in our backlog year over year was primarily driven by strong demand and increased market share within our Communications, Residential and Infrastructure Solutions segments.

Additionally, the backlog at our Commercial & Industrial segment at September 30, 2021 reflected the awarding of projects that had been deferred or otherwise delayed during the year ended September 30, 2020 as a result of the COVID-19 pandemic.

The increase in our backlog year over year was primarily driven by strong demand and increased market share within our all segments.

Our operations are subject to various federal, state and local laws and regulations, including:

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During fiscal year 2022, the Company maintained a revolving credit facility, as further described in Item 7.

“ Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources ” of this Annual Report on Form 10-K.

“ Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources ” of this Annual Report

on Form 10-K.

For a discussion of the Company’s capital resources, see Item 7.

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We have invested significant resources in development opportunities for employees.

For example, our Residential segment has established the IES Residential Education Center, a dedicated facility that trains employees from around the country in the technical

skills necessary for a successful career in residential electrical contracting.

At all of our segments, partly as a result of the COVID-19 pandemic, we have recently expanded our online training offerings to help meet the needs of our changing workplaces.

For example, our Residential segment has established the IES Residential Education Center, a dedicated facility that trains employees from around the country in the technical skills necessary for a successful career in residential electrical contracting.

At all of our segments, partly as a result of the COVID-19 pandemic, we expanded online training offerings to help meet the needs of our changing workplaces.

We believe our investment in training supports employee motivation and retention at the same time that it improves productivity and performance.

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Our safety leadership continuously monitors and addresses safety performance, provides regular training and educational programs on safety and participates in numerous industry safety organizations.

In response to the COVID-19 pandemic, we assembled a task force and implemented numerous measures aimed at protecting the health and safety of our employees including additional personal protective equipment, on-site health screenings in some locations, social distancing, deep cleaning protocols and travel restrictions.

The Company continues to monitor evolving health and safety guidelines and regulations.

As of September 30, 2021, we have 99 domestic locations serving the United States.

As of September 30, 2022, we have 130 domestic locations.

In addition to our two executive and corporate offices, as of September 30, 2022, we have 19 locations within our Communications business, 77 locations within our Residential business, 13 locations within our Infrastructure Solutions business and 19 locations within our Commercial & Industrial business.

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Certain information with respect to each executive officer is as follows:

Gendell, 62, has served as the Company's Chief Executive Officer since October 1, 2020;

Gendell, 63, has served as the Chief Executive Officer of the Company since October 1, 2020;

he previously served as Interim Chief Executive Officer from July 31, 2020 to September 30, 2020.

Gendell has also served as the Chairman of the Board since November 2016.

Gendell is the founder and managing member of Tontine Associates, which together with its affiliates is the Company's majority shareholder.

Gendell has also served as a director and as Chairman of the Board since November 2016.

Gendell is the founder and managing member of Tontine, the majority stockholder of the Company.

Gendell formed Tontine in 1995 and manages all of the investment decisions at the firm.

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Gendell held senior investment management positions at several other private investment firms, including Odyssey Partners, L.P., and began his career in investment banking over 35 years ago at Smith Barney, Harris Upham & Co., where he was involved in capital markets, corporate finance and M&A activity.

Simmes , 47, has served as Chief Operating Officer of the Company since December 3, 2021.

Simmes has spent 28 years at IES and its predecessors in a variety of roles.

Prior to becoming President of IES Communications in January 2017, he was the segment’s Vice President of Operations from March 2007 to December 2016 and branch manager of its Arizona operations from 2003 to 2006.

McLauchlin , 53, has served as Senior Vice President, Chief Financial Officer and Treasurer of the Company since May 2015.

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McLauchlin is a Certified Public Accountant.

Newman , 42, has served as Vice President, General Counsel and Corporate Secretary of the Company since December 2019.

Prior to joining IES, Ms.

Newman was a Partner with the law firm of Dinsmore & Shohl, LLP from January 2017 to November 2019 and was an Associate from September 2011 to December 2016, where her practice focused on representing public and private companies in corporate transactions, including mergers, acquisitions and dispositions.

She began her legal career with the law firm of Sullivan & Cromwell LLP after receiving her J.D.

from Harvard Law School and B.A.

from Duke University.

We have adopted a Code of Ethics for Financial Executives that applies to our principal executive officer, principal financial officer and principal accounting officer.

The Code of Ethics may be found on our website at www.ies-corporate.com/corporate-governance .

The Code of Ethics may be found on our website at www.ies-corporate.com/governance-documents .

If we make any substantive amendments to the Code of Ethics or grant any waiver, including any implicit waiver, from a provision of the Code of Ethics to our principal executive officer, principal financial officer or principal accounting officer, we will disclose the nature of such amendment or waiver on that website or in a Current Report on Form 8-K.

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Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as any amendments and exhibits to those reports are available free of charge through our website as soon as it is reasonably practicable after we file them with, or furnish them to, the SEC.

You may also contact our Investor Relations department which will provide you with a copy of these reports , or you may find them at www.ies-corporate.com/sec-filings .

You may also contact our Investor Relations department which will provide you with a copy of these reports, or you may find them at www.ies-corporate.com/financial-information/sec-filings .

The materials that we file with the SEC are also available free of charge through the SEC’s website at www.sec.gov .

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business