IES Holdings, Inc. 10-K

Item 8. Financial Statements and Supplementary Data INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Reports of Independent Registered Public Accounting Firm (PCAOB ID 42 ) 41 Consolidated Balance Sheets 43 Consolidated Statements of Comprehensive Income 44 Consolidated Statements of Stockholders' Equity 45 Consolidated Statements of Cash Flows 46 Notes to Consolidated Financial Statements 47 40 Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of IES Holdings, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of IES Holdings, Inc. and subsidiaries (the Company) as of September 30, 2024 and 2023, the related consolidated statements of comprehensive income , stockholders' equity and cash flows for each of the three years in the period ended September 30, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at September 30, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2024, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of September 30, 2024, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated November 22, 2024 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosures to which it relates. Revenue recognition for certain fixed-price construction contracts Description of the Matter As described in Notes 2 and 4 to the consolidated financial statements, the Company principally recognizes revenue on construction contracts over time using costs incurred as a percentage of estimated total costs at completion to determine the extent of progress toward satisfying performance obligations. The extent of progress is applied to the contract transaction price, which may include variable consideration associated with unapproved change orders, customer claims and incentives. Revenue recognition under this method is subject to judgment as the determination of progress towards completion requires management to prepare estimates of the transaction price and total project costs to complete. Auditing management’s estimates for certain projects structured under fixed-price arrangements, and which are larger in size and longer in duration, was complex and subjective, requiring considerable judgment to evaluate management’s determination of variable consideration, specifically as it related to the impact of reductions in scope and potential customer claims. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s estimating process, including controls over management’s review of significant inputs and judgments with respect to the measurement of variable consideration. Our audit procedures included, among others, evaluating appropriate application of the Company’s revenue recognition method; testing significant assumptions used to develop the estimated transaction price; and testing the completeness and accuracy of the underlying data. To assess the reasonableness of management’s estimated transaction price, we performed audit procedures that included, among others, agreeing the estimate to supporting documentation; conducting interviews with project personnel; attending select project review meetings; and performing retrospective review. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2002. Houston, Texas November 22, 2024 41 Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of IES Holdings, Inc. Opinion on Internal Control Over Financial Reporting We have audited IES Holdings, Inc. and subsidiaries’ internal control over financial reporting as of September 30, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, IES Holdings, Inc. and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of September 30, 2024, based on the COSO criteria. As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Greiner Industries, Inc., which is included in the 2024 consolidated financial statements of the Company and constituted 6% and 12% of total and net assets, respectively, as of September 30, 2024 and 1% of both revenues and net income for the year then ended. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Greiner Industries, Inc. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of September 30, 2024 and 2023, the related consolidated statements of comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended September 30, 2024, and the related notes and our report dated November 22, 2024 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Houston, Texas November 22, 2024 42 IES HOLDINGS, INC. AND SUBSIDIARIES Consolidated Balance Sheets (In Thousands, Except Share Information) September 30, 2024 2023 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 100,832 $ 75,770 Marketable securities 35,003 — Accounts receivable: Trade, net of allowance 469,833 363,836 Retainage 89,793 76,934 Inventories 101,728 95,655 Costs and estimated earnings in excess of billings 60,139 48,620 Prepaid expenses and other current assets 14,366 10,481 Total current assets 871,694 671,296 Property and equipment, net 134,197 63,410 Goodwill 93,960 92,395 Intangible assets, net 45,890 56,208 Deferred tax assets 22,458 20,383 Operating right of use assets 61,956 61,761 Other non-current assets 13,871 16,147 Total assets $ 1,244,026 $ 981,600 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses 363,582 296,797 Billings in excess of costs and estimated earnings 158,972 103,771 Total current liabilities 522,554 400,568 Long-term debt — — Operating long-term lease liabilities 40,445 42,098 Other tax liabilities 16,677 22,047 Other non-current liabilities 12,241 16,951 Total liabilities 591,917 481,664 Noncontrolling interest 40,996 49,951 COMMITMENTS AND CONTINGENCIES (NOTE 18 ) STOCKHOLDERS’ EQUITY: Preferred stock, $ 0.01 par value, 10,000,000 shares authorized, none issued and outstanding — — Common stock, $ 0.01 par value, 100,000,000 shares authorized; 22,049,529 issued and 19,971,670 and 20,194,218 outstanding, respectively 220 220 Treasury stock, at cost, 2,077,859 and 1,855,311 shares, respectively ( 90,325 ) ( 49,450 ) Additional paid-in capital 203,458 203,431 Retained earnings 497,760 295,784 Total stockholders’ equity 611,113 449,985 Total liabilities and stockholders’ equity $ 1,244,026 $ 981,600 The accompanying notes are an integral part of these Consolidated Financial Statements. 43 IES HOLDINGS, INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income (In Thousands, Except Share Information) Year Ended September 30, 2024 2023 2022 Revenues $ 2,884,358 $ 2,377,227 $ 2,166,808 Cost of services 2,187,768 1,932,688 1,847,878 Gross profit 696,590 444,539 318,930 Selling, general and administrative expenses 396,684 298,625 262,714 Contingent consideration 714 277 277 Gain on sale of assets ( 1,684 ) ( 14,139 ) ( 69 ) Operating income 300,876 159,776 56,008 Interest and other (income) expense: Interest expense 1,338 3,022 2,970 Other (income) expense, net ( 5,128 ) ( 1,794 ) 37 Income from operations before income taxes 304,666 158,548 53,001 Provision for income taxes 72,165 38,761 12,815 Net income 232,501 119,787 40,186 Net income attributable to noncontrolling interest ( 13,385 ) ( 11,499 ) ( 5,424 ) Comprehensive income attributable to IES Holdings, Inc. $ 219,116 $ 108,288 $ 34,762 Earnings per share attributable to common stockholders of IES Holdings, Inc.: Basic $ 10.02 $ 4.58 $ 1.45 Diluted $ 9.89 $ 4.54 $ 1.44 Shares used in the computation of earnings per share: Basic 20,160,143 20,196,850 20,667,745 Diluted 20,414,932 20,413,032 20,894,625 The accompanying notes are an integral part of these Consolidated Financial Statements. 44 IES HOLDINGS, INC. AND SUBSIDIARIES Consolidated Statements of Stockholders’ Equity (In Thousands, Except Share Information) Common Stock Treasury Stock Additional Paid-In Capital Retained Earnings Total Stockholders' Equity Shares Amount Shares Amount BALANCE, September 30, 2021 22,049,529 $ 220 ( 1,316,998 ) $ ( 29,300 ) $ 201,899 $ 173,134 $ 345,953 Issuance of share-based compensation — — 157,167 3,638 ( 3,638 ) — — Acquisition of treasury stock — — ( 556,798 ) ( 18,556 ) — — ( 18,556 ) Options exercised — — 9,000 218 ( 165 ) — 53 Non-cash compensation — — — — 3,775 — 3,775 Increase in noncontrolling interest — — — — — ( 4,699 ) ( 4,699 ) Net income attributable to IES Holdings, Inc. — — — — — 34,762 34,762 BALANCE, September 30, 2022 22,049,529 $ 220 ( 1,707,629 ) $ ( 44,000 ) $ 201,871 $ 203,197 $ 361,288 Issuance of share-based compensation — — 105,755 2,764 ( 2,764 ) — — Acquisition of treasury stock — — ( 256,437 ) ( 8,294 ) 10 — ( 8,284 ) Options exercised — — 3,000 80 ( 58 ) — 22 Non-cash compensation — — — — 4,372 — 4,372 Increase in noncontrolling interest — — — — — ( 15,701 ) ( 15,701 ) Net income attributable to IES Holdings, Inc. — — — — — 108,288 108,288 BALANCE, September 30, 2023 22,049,529 $ 220 ( 1,855,311 ) $ ( 49,450 ) $ 203,431 $ 295,784 $ 449,985 Issuance of share-based compensation — — 104,600 3,062 ( 3,062 ) — — Acquisition of treasury stock — — ( 329,648 ) ( 44,028 ) — — ( 44,028 ) Options exercised — — 2,500 91 ( 72 ) — 19 Non-cash compensation — — — — 5,517 — 5,517 Change in IES Holdings, Inc.'s ownership interest in consolidated subsidiaries — — — — ( 2,356 ) — ( 2,356 ) Increase in noncontrolling interest — — — — — ( 17,140 ) ( 17,140 ) Net income attributable to IES Holdings, Inc. — — — — — 219,116 219,116 BALANCE, September 30, 2024 22,049,529 $ 220 ( 2,077,859 ) $ ( 90,325 ) $ 203,458 $ 497,760 $ 611,113 The accompanying notes are an integral part of these Consolidated Financial Statements. 45 IES HOLDINGS, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (In Thousands) Year Ended September 30, 2024 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 232,501 $ 119,787 $ 40,186 Adjustments to reconcile net income to net cash provided by operating activities: Bad debt expense (benefit) 1,481 ( 120 ) 3,141 Deferred financing cost amortization 287 268 199 Depreciation and amortization 37,103 29,407 25,468 Gain on sale of assets ( 1,684 ) ( 14,139 ) ( 69 ) Non-cash compensation expense 5,532 4,372 3,775 Deferred income tax expense (benefit) and other non-cash tax adjustments, net ( 1,126 ) 5,185 ( 31 ) Unrealized gain on trading securities ( 1,789 ) — — Changes in operating assets and liabilities Marketable securities ( 33,214 ) — — Accounts receivable ( 93,507 ) 2,917 ( 87,160 ) Inventories ( 3,522 ) ( 1,142 ) ( 27,760 ) Costs and estimated earnings in excess of billings ( 3,979 ) 3,456 ( 8,688 ) Prepaid expenses and other current assets ( 16,720 ) ( 7,322 ) ( 18,609 ) Other non-current assets 174 2,067 ( 3,006 ) Accounts payable and accrued expenses 57,894 ( 10,047 ) 67,128 Billings in excess of costs and estimated earnings 54,550 19,051 22,450 Other non-current liabilities 423 162 ( 762 ) Net cash provided by operating activities 234,404 153,902 16,262 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment ( 45,159 ) ( 17,667 ) ( 29,255 ) Proceeds from sales of assets 3,694 20,602 219 Cash paid in conjunction with equity investments ( 380 ) ( 165 ) ( 500 ) Cash paid in conjunction with business combinations or dispositions, net of cash acquired ( 67,002 ) — — Net cash provided by (used in) investing activities ( 108,847 ) 2,770 ( 29,536 ) CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings of debt 2,896,346 2,381,562 1,924,469 Repayments of debt ( 2,896,346 ) ( 2,464,221 ) ( 1,882,148 ) Cash paid for finance leases ( 4,257 ) ( 3,338 ) ( 1,801 ) Purchase of noncontrolling interest ( 32,000 ) — — Settlement of contingent consideration liability ( 4,074 ) — — Distribution to noncontrolling interest ( 16,155 ) ( 11,491 ) ( 7,000 ) Purchase of treasury stock ( 44,028 ) ( 8,284 ) ( 18,556 ) Options exercised 19 22 53 Net cash provided by (used in) financing activities ( 100,495 ) ( 105,750 ) 15,017 NET INCREASE IN CASH AND CASH EQUIVALENTS 25,062 50,922 1,743 CASH, CASH EQUIVALENTS, beginning of period 75,770 24,848 23,105 CASH, CASH EQUIVALENTS, end of period $ 100,832 $ 75,770 $ 24,848 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest $ 536 $ 2,089 $ 3,068 Cash paid for income taxes, net $ 61,614 $ 12,056 $ 3,953 SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES: Property and equipment acquired in exchange for liabilities $ — $ 4,712 $ — Contingent consideration liability assumed in conjunction with business combinations $ 2,790 $ — $ — The accompanying notes are an integral part of these Consolidated Financial Statements. 46 IES HOLDINGS, INC. Notes to the Consolidated Financial Statements (All Amounts in Thousands Except Share Amounts) 1. BUSINESS Description of the Business IES Holdings, Inc. designs and installs integrated electrical and technology systems and provides infrastructure products and services to a variety of end markets, including data centers, residential housing and commercial and industrial facilities. Our operations are organized into four business segments, based upon the nature of our services: • Communications – Nationwide provider of technology infrastructure services, including the design, build, and maintenance of the communications infrastructure within data centers for co-location and managed hosting customers, for both large corporations and independent businesses. • Residential – Regional provider of electrical installation services for single-family housing and multi-family apartment complexes, as well as heating, ventilation and air conditioning (HVAC) and plumbing installation services in certain markets. • Infrastructure Solutions – Provider of electro-mechanical solutions for industrial operations, including apparatus repair and custom-engineered products such as generator enclosures used in data centers and other industrial applications. • Commercial & Industrial – Provider of electrical and mechanical design, construction, and maintenance services to the commercial and industrial markets in various regional markets and nationwide in certain areas of expertise, such as the power infrastructure market and data centers. The words “IES”, the “Company”, “we”, “our”, and “us” refer to IES Holdings, Inc. and, except as otherwise specified herein, to our consolidated subsidiaries. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The accompanying Consolidated Financial Statements include the accounts of IES Holdings, Inc. and its consolidated subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires the use of estimates and assumptions by management in determining the reported amounts of assets and liabilities, disclosures of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates are primarily used in our revenue recognition of construction in progress, fair value assumptions in accounting for business combinations, stock-based compensation, reserves for legal matters, and realizability of deferred tax assets and unrecognized tax benefits. Cash and Cash Equivalents We consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Marketable Securities Marketable securities consist of highly liquid equity securities and debt securities with original maturities over three months. All of our marketable debt securities are classified as trading securities and mature after one year and before five years at September 30, 2024. Our marketable securities with readily determinable fair values are carried at fair value, with gains and losses included in Other (income) expense, net on our Consolidated Statements of Comprehensive Income. Inventories Inventories consist of raw materials, work in process, finished goods, and parts and supplies held for use in the ordinary course of business. Inventory is valued at the lower of cost or net realizable value generally using the first-in, first-out (FIFO) method. When circumstances dictate, we write down inventory to its estimated net realizable value based on assumptions about future demand, market conditions, plans for disposal, and physical condition of the product. Where shipping and handling costs on inventory purchases are borne by us, these charges are included in inventory and charged to cost of services upon use in our projects or the providing of services. 47 Property and Equipment Additions of property and equipment are recorded at cost, and depreciation is computed using the straight-line method over the estimated useful life of the related asset. Leasehold improvements are capitalized and depreciated over the lesser of the life of the lease or the estimated useful life of the asset. Costs associated with software developed or obtained for internal use, including third party development fees incurred during the application development stage and software licenses, are capitalized and amortized on a straight-line basis over the estimated useful life of the software. Expenditures for repairs and maintenance are charged to expense when incurred. Expenditures for major renewals and betterments, which extend the useful lives of existing property and equipment, are capitalized and depreciated. Upon retirement or disposition of property and equipment, the capitalized cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the statements of comprehensive income in the caption (gain) loss on sale of assets. Goodwill Goodwill attributable to each reporting unit is tested for impairment either by comparing the fair value of each reporting unit with its carrying value or by a qualitative assessment. These impairment tests are required to be performed at least annually. On an ongoing basis (absent any impairment indicators), we perform an impairment test annually using a measurement date of September 30. In evaluating goodwill for impairment, we have the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is greater than its carrying value. If we determine that it is more likely than not that the carrying value of a reporting unit is greater than its fair value, then we perform an impairment test by calculating the fair value of the reporting unit and comparing this calculated fair value with the carrying value of the reporting unit. We estimate the fair value of the reporting unit based on both a market approach and an income approach, using discounted estimated future cash flows. The market approach uses market multiples of enterprise value to earnings before interest, taxes, depreciation and amortization for comparable publicly traded companies. The income approach relies on significant estimates for future cash flows, projected long-term growth rates, and the weighted average cost of capital. Intangible Assets Intangible assets with definite lives are amortized over their estimated useful lives based on expected economic benefit with no residual value. Debt Issuance Costs Debt issuance costs are included as a reduction of our debt outstanding, or alternately classified within other non-current assets if we have no borrowings drawn on our credit facility at the balance sheet date, and are amortized to interest expense over the scheduled maturity of the debt. Amortization expense of debt issuance costs was $ 287 , $ 268 and $ 199 , respectively, for the years ended September 30, 2024, 2023 and 2022. Remaining unamortized capitalized debt issuance costs were $ 598 and $ 836 at September 30, 2024, and 2023, respectively. Revenue Recognition Revenue is recognized from a contract with a customer when: (i) it has approval and commitment from both parties, (ii) the rights of the parties are identified, (iii) payment terms are identified, (iv) the contract has commercial substance, and (v) collectability of consideration is probable. We consider the start of a project to be when the above criteria have been met and we have written authorization from the customer to proceed. We recognize revenue on project contracts over time using the percentage of completion method. Project contracts generally provide that customers accept completion of progress to date and compensate us for services rendered measured in terms of units installed, hours expended or some other measure of progress. We recognize revenue on both signed contracts and change orders. A discussion of our treatment of claims and unapproved change orders is described later in this section. Percentage of completion for construction contracts is measured principally by the percentage of costs incurred and accrued to date for each contract to the estimated total cost for each contract at completion. We generally consider contracts to be substantially complete upon departure from the work site and acceptance by the customer. Contract costs include all direct material, labor and insurance costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs and depreciation costs. Changes in job performance, job conditions, estimated contract costs and profitability and final contract settlements can result in change orders under which the customer agrees to pay additional contract price. Revisions can also result in claims we might make against the customer to recover additional costs that have not been resolved through change orders with the customer. We recognize revenue from change orders or claims when recovery of such amounts is probable. The amount of revenue associated with unapproved change orders and claims was immaterial for the years ended September 30, 2024, 2023 and 2022. Provisions for total estimated losses on uncompleted contracts are 48 made in the period in which such losses are determined. The balances billed but not paid by customers pursuant to retainage provisions in project contracts are typically due upon completion of the contracts and acceptance by the customer. Based on our experience, the retention balance at each balance sheet date will be collected within the subsequent fiscal year. Certain divisions in our operating segments recognize revenue at the completion of the contract ("completed contract") under the right to invoice practical expedient because the duration of their contracts is short in nature. We recognize revenue on completed contracts when the project is complete and billable to the customer. Accounts Receivable and Allowance for Credit Losses We record accounts receivable for all amounts billed and not collected and amounts for which we have an unconditional right to bill our customers. Additionally, we provide an allowance for credit losses based on historical company-specific uncollectable accounts, as well as current and expected market conditions. From time to time, we establish additional allowance for credit losses for financial asset balances with specific customers where collectability has been determined to be improbable based on specific facts and circumstances. Such allowances are established as deemed necessary in the period such determination is made. As is common in our industry, some of these receivables are in litigation or require us to exercise our contractual lien rights in order to collect. Our allowance for credit losses at September 30, 2024 and 2023 was $ 1,818 and $ 1,649 , respectively. In calculating our expected credit losses, we consider trade receivables, retainage, and costs and estimated earnings in excess of billings, all of which constitute a homogenous portfolio, and therefore, to measure the expected credit loss, they are grouped together. We have elected to calculate an expected credit loss based on loss rates from historical data. Each segment groups financial assets with similar risk characteristics and collectively assesses the expected credit losses. If an individual asset experiences credit deterioration to the extent the credit risk is no longer characteristic of the other assets in the group, it will be analyzed individually. The loss rates for our portfolios include our history of credit loss expense, the aging of our receivables, our expectation of payments and adjustment for forward-looking factors specific to the macroeconomic trends in the markets we serve. Comprehensive Income (Loss) Comprehensive income (loss) includes all changes in equity during a period except those resulting from investments by and distributions to stockholders. Income Taxes We follow the liability method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are recorded for the future income tax consequences of temporary differences between the financial reporting and income tax bases of assets and liabilities, and are measured using enacted tax rates and laws. We evaluate valuation allowances established for deferred tax assets for which future realization is uncertain on a quarterly basis. In assessing the realizability of deferred tax assets, we must consider whether it is more likely than not some portion, or all, of the deferred tax assets will not be realized. We consider all available evidence, both positive and negative, in determining whether a valuation allowance is required. At September 30, 2024, we concluded, based upon the assessment of positive and negative evidence, that it is more likely than not that the Company will generate sufficient taxable income to realize net deferred tax assets of $ 22,458 . We considered the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. If actual future taxable income is different from these estimates, our results could be affected. We record reserves for income taxes related to certain tax positions when management considers it more likely than not that additional taxes may be due in excess of amounts reflected on income tax returns filed. When recording these reserves, we assume that taxing authorities have full knowledge of the position and all relevant facts. We continually review exposure to additional tax obligations, and as further information is known or events occur, changes in tax reserves may be recorded. To the extent interest and penalties may be assessed by taxing authorities on any underpayment of income tax, such amounts have been accrued and included in the provision for income taxes. Fair Value of Financial Instruments Our financial instruments consist of cash and cash equivalents, marketable securities, accounts receivable, accounts payable, and a loan agreement. We believe that the carrying value of financial instruments approximates their fair value due to their short-term nature. The carrying value of our debt approximates fair value, as debt incurs interest at a variable rate. 49 Noncontrolling Interest In connection with our acquisitions of Edmonson Electric, LLC (“Edmonson”) and Bayonet Plumbing, Heating & Air-Conditioning, LLC (“Bayonet”) in fiscal 2021, and NEXT Electric, LLC (“NEXT”) in fiscal 2017, we acquired an 80 percent interest in each of the entities, with the remaining 20 percent interest in each such entity being retained by the respective third party sellers. The interests retained by those third party sellers are identified on our Consolidated Balance Sheets as noncontrolling interest, classified outside of permanent equity. Under the terms of each entity’s operating agreement, after five years from the date of the acquisition, we may elect to purchase, or the third party seller may require us to purchase, part or all of the remaining 20 percent interest in the applicable entity. The purchase price is variable, based on a multiple of earnings as defined in the operating agreements. Therefore, this noncontrolling interest is carried at the greater of the balance determined under Accounting Standards Codification (“ASC”) 810 and the redemption amounts assuming the noncontrolling interests were redeemable at the balance sheet date. On June 28, 2024, we purchased the remaining 20 percent noncontrolling interest in Bayonet for $32,000. As we retained our controlling interest in Bayonet, the change in ownership interest was accounted for as an equity transaction. The difference between the balance of the noncontrolling interest at the date of redemption of the remaining interests and the consideration paid was recognized in Additional Paid-In Capital in the accompanying Consolidated Balance Sheets and was not reflected in earnings. If all of the noncontrolling interests remaining outstanding at September 30, 2024 had been redeemable at that date, the redemption amount would have been $ 40,996 . The activity in redeemable noncontrolling interest is summarized in the table below. Year Ended September 30, 2024 2023 2022 Balance at beginning of period $ 49,951 $ 29,193 $ 24,594 Net income attributable to noncontrolling interests 13,385 11,499 5,424 Distributions to noncontrolling interests ( 16,155 ) ( 11,491 ) ( 7,000 ) Adjustments to record noncontrolling interests at redemption value 22,695 20,750 6,175 Adjustment to record noncontrolling interests at value of consideration paid to acquire ownership interest 3,120 — — Purchase of ownership interest from noncontrolling interests ( 32,000 ) — — Balance at end of period $ 40,996 $ 49,951 $ 29,193 Leases We enter into various contractual arrangements for the right to use facilities, vehicles and equipment. We evaluate whether each of these arrangements contains a lease and classify all identified leases as either operating or finance. If the arrangement is subsequently modified, we re-evaluate our classification. The lease term generally ranges from two to ten years for facilities and three to five years for vehicles and equipment. Our lease terms may include the exercise of renewal or termination options when it is reasonably certain these options will be exercised. Our lease agreements do not contain any material residual value guarantees or restrictive covenants. Upon commencement of the lease, we recognize a lease liability and corresponding right-of-use (“ROU”) asset for all leases with an initial term greater than twelve months. Lease liabilities represent the present value of our future lease payments over the expected lease term. As most of our leases do not provide an implicit rate, we generally use our incremental borrowing rate as the discount rate in calculating the present value of the lease payments. The incremental borrowing rate is determined by identifying a synthetic credit rating for the consolidated company, where treasury functions are centrally managed, and adjusting the interest rates from associated indexes for differences in credit risk and interest rate risk. We have elected to combine the lease and nonlease components in the recognition of our lease liabilities across all classes of underlying assets. ROU assets represent our right to control the use of the leased asset during the lease and are recognized in an amount equal to the lease liability with adjustments for prepaid or accrued rent, lease incentives or unamortized initial direct costs. Costs associated with ROU assets are recognized on a straight-line basis over the term of the lease. Our lease assets are tested for impairment in the same manner as long-lived assets used in operations. Certain lease contracts include obligations to pay for other services, such as operations and maintenance. Where the costs of these services can be identified as fixed or fixed-in-substance, the costs are included as part of the future lease payments. If the cost is not fixed at the inception of the lease, the cost is recorded as a variable cost in the period incurred. Accounting Standards Recently Adopted In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”). 50 This standard amends the existing guidance under ASC 805 to add contract assets and contract liabilities to the list of exceptions to the recognition and measurement principles that apply to business combinations. Under this standard, the acquirer of a business is expected to recognize and measure acquired contract assets and contract liabilities as if the acquirer entered into the original contract on the same date with the same terms in accordance with ASC 606 rather than at fair value on the date of acquisition. This update is effective for fiscal years beginning after December 15, 2022 and for interim periods within that year. We adopted this standard on October 1, 2023 using the prospective method. ASU 2021-08 impacts how we account for business combinations completed after its adoption. In December 2019, the FASB issued Accounting Standard Update No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This standard simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in Topic 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The standard also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. This update is effective for fiscal years beginning after December 15, 2020 and for interim periods within that year. Early adoption is permitted. We adopted this standard on October 1, 2021 with immaterial impact on our Consolidated Financial Statements. Recent Accounting Pronouncements and Disclosure Rules Not Yet Adopted In December 2023, the FASB issued Accounting Standard Update No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). This standard requires more detailed disclosure within the tax rate reconciliation table, as well as additional information about cash taxes paid. This update is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. We are evaluating the impact this update will have on our annual disclosures; however, it will not impact our financial condition, results of operations, or cash flows. In November 2023, the FASB issued Accounting Standard Update No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). This standard requires disclosure of significant segment expenses, other segment items, and additional information about the chief operating decision maker (“CODM”). This update is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted, and retrospective application is required. We are evaluating the impact this update will have on our annual disclosures; however, it will not impact our financial condition, results of operations, or cash flows. In November 2024, the FASB issued Accounting Standard Update No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”). This standard requires additional disclosures over certain expenses, including purchases of inventory, employee compensation, depreciation, intangible asset amortization, and other specific expense categories. This standard also requires disclosure of the total amount of selling expenses and the Company's definition of selling expenses. This update is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. We are evaluating the impact this update will have on our annual disclosures; however, it will not impact our financial condition, results of operations, or cash flows. 3. CONTROLLING SHAREHOLDER Tontine Associates, L.L.C. (“Tontine Associates”), together with its affiliates (collectively, “Tontine”) is the Company's controlling stockholder, owning approximately 55 percent of the Company’s outstanding common stock based on a Form 4 filed by Tontine with the SEC on September 16, 2024 and the Company's shares outstanding as of November 18, 2024. Accordingly, Tontine has the ability to exercise significant control over our affairs, including the election of directors and most actions requiring the approval of shareholders. While Tontine is subject to certain restrictions under federal securities laws on sales of its shares as an affiliate, the Company has filed a resale shelf registration statement to register for resale a majority of the shares of IES common stock owned by Tontine. As long as the resale shelf registration statement remains effective and the Company remains eligible to use it, Tontine has the ability to resell any or all of its registered shares from time to time in one or more offerings, as described in the resale shelf registration statement and in any prospectus supplement filed in connection with an offering pursuant to the resale shelf registration statement. Should Tontine, or its underlying individual owners, sell or otherwise dispose of all or a significant portion of its position in IES, a change in ownership of IES could occur. A change of control would trigger the change of control provisions in a number of our material agreements, including our credit agreement, bonding agreements with our sureties and our executive severance plan. 51 Jeffrey L. Gendell was appointed as Chief Executive Officer of the Company effective October 1, 2020, having served as the Company's Interim Chief Executive Officer since July 31, 2020. Mr. Gendell also serves as Chairman of the Board of Directors, a position he has held since November 2016. He is the managing member and founder of Tontine, and the brother of David B. Gendell, who has served as a member of our Board of Directors since February 2012, and who previously served as Interim Director of Operations from November 2017 to January 2019, as Vice Chairman of the Board from November 2016 to November 2017 and as Chairman of the Board from January 2015 to November 2016. David B. Gendell was an employee of Tontine from 2004 until January 2018. The Company is a party to a sublease agreement with Tontine Associates, for corporate office space in Greenwich, Connecticut. In December 2022, the Company entered into an amendment of the sublease agreement, which was set to terminate on February 28, 2023, to extend the term of the agreement through August 31, 2024 and to increase the monthly payments from approximately $8 to approximately $9 effective March 1, 2023. On August 1, 2024, the Company entered into an amendment of the sublease agreement to extend the term of the agreement through September 30, 2025, effective September 1, 2024. Payments by the Company are at a rate consistent with that paid by Tontine Associates to its landlord. On December 6, 2018, the Company entered into a Board Observer Letter Agreement (the "Observer Agreement") with Tontine Associates, in order to assist Tontine in managing its investment in the Company. Subject to the terms and conditions set forth in the Observer Agreement, the Company granted Tontine the right, at any time that Tontine holds at least 20% of the outstanding common stock of the Company, to appoint a representative to serve as an observer to the Board (the “Board Observer”). The Board Observer, who must be reasonably acceptable to those members of the Board who are not affiliates of Tontine, shall have no voting rights or other decision making authority. Subject to the terms and conditions set forth in the Observer Agreement, so long as Tontine has the right to appoint a Board Observer, the Board Observer will have the right to attend and participate in meetings of the Board and the committees thereof, subject to confidentiality requirements, and to receive reimbursement for reasonable out-of-pocket expenses incurred in his or her capacity as a Board Observer and such rights to coverage under the Company’s directors’ and officers’ liability insurance policy as are available to the Company’s directors. 4. REVENUE RECOGNITION Contracts Our revenue is derived from contracts with customers, and we determine the appropriate accounting treatment for each contract at its inception. Our contracts primarily relate to electrical and mechanical contracting services, technology infrastructure products and services, and electro-mechanical solutions for industrial operations. Revenue is earned based upon an agreed fixed price or actual costs incurred plus an agreed upon percentage. We account for a contract when: (i) it has approval and commitment from both parties, (ii) the rights of the parties are identified, (iii) payment terms are identified, (iv) the contract has commercial substance, and (v) collectability of consideration is probable. We consider the start of a project to be when the above criteria have been met and we have written authorization from the customer to proceed. Performance Obligations A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. In our Residential Single-family business and our Infrastructure Solutions Industrial Services business, our contracts are generally in the form of purchase orders issued to us by the customer. We recognize revenue upon completion of the services specified in the purchase order. We recognize revenue over time for the majority of the services we perform, other than the Residential Single-family and Infrastructure Solutions Industrial Services businesses, as (i) control continuously transfers to the customer as work progresses at a project location controlled by the customer and (ii) we have the right to bill the customer as costs are incurred. Within our Infrastructure Solutions Custom Engineered Solutions business, we often perform work inside our own facilities, where control does not continuously transfer to the customer as work progresses. In such cases, we evaluate whether the work performed creates an asset with alternative use to the Company and whether we have the right to bill the customer as costs are incurred. Such assessment involves an evaluation of contractual termination clauses. Where we are creating an asset with no alternative use and we have a contractual right to payment for work performed to date, we recognize revenue over time. If we do not have such a right, we recognize revenue upon completion of the contract, when control of the work transfers to the customer. For arrangements where we recognize revenue over time, we generally use the percentage of completion method of accounting under which revenue recognized is measured principally by the costs incurred and accrued to date for each contract as a percentage of the 52 estimated total cost for each contract at completion. Contract costs include all direct material, labor and indirect costs related to contract performance. Changes in job performance, job conditions, estimated contract costs and profitability and final contract settlements may result in revisions to costs and income, and the effects of these revisions are recognized in the period in which the revisions are determined. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. This measurement and comparison process requires updates to the estimate of total costs to complete the contract, and these updates may include subjective assessments and judgments. Revenue for arrangements whose durations are short in nature is recognized when the project is complete and billable to the customer under the right to invoice practical expedient. Variable Consideration The transaction price for our contracts may include variable consideration, which includes changes to transaction price for approved and unapproved change orders, claims and incentives. Change orders, claims and incentives are generally not distinct from the existing contract due to the significant integration service provided in the context of the contract and are accounted for as a modification of the existing contract. We estimate variable consideration at the probability weighted value we expect to receive (or the most probable amount we expect to incur in the case of liquidated damages, if any), utilizing estimation methods that best predict the amount of consideration to which we will be entitled (or will be incurred in the case of liquidated damages, if any). We include variable consideration in the estimated transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include estimated amounts in transaction price are based largely on an assessment of our anticipated performance and all information (historical, current and forecasted) that is reasonably available to us. The effect of variable consideration on the transaction price of a performance obligation is recognized as an adjustment to revenue on a cumulative catch-up basis. To the extent unapproved change orders and claims reflected in transaction price (or accounted for as a reduction of the transaction price in the case of liquidated damages) are not resolved in our favor, or to the extent incentives reflected in transaction price are not earned, there could be reductions in, or reversals of, previously recognized revenue. Disaggregation of Revenue We disaggregate our revenue from contracts with customers by activity and contract type, as these categories reflect how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. During the year ended September 30, 2024, we began to disaggregate the revenue from our Residential operating segment's single-family electrical and single-family plumbing & HVAC businesses, which was aggregated under our Residential single-family business in prior periods, to provide more detail about the major product lines significant to our Residential business. Our consolidated revenue for the years ended September 30, 2024, 2023 and 2022 was derived from the following activities. Prior period amounts have been reclassified to conform with the current period presentation, where applicable. See details in the following tables: Year Ended September 30, 2024 2023 2022 Communications $ 776,474 $ 600,776 $ 559,777 Residential Single-family Electrical 732,334 717,386 660,602 Single-family Plumbing & HVAC 324,911 243,885 164,903 Multi-family and Other 331,595 318,233 305,909 Total Residential 1,388,840 1,279,504 1,131,414 Infrastructure Solutions Industrial Services 53,291 46,091 65,686 Custom Engineered Solutions 297,805 171,262 101,427 Total Infrastructure Solutions 351,096 217,353 167,113 Commercial & Industrial 367,948 279,594 308,504 Total Revenue $ 2,884,358 $ 2,377,227 $ 2,166,808 53 Year Ended September 30, 2024 Communications Residential Infrastructure Solutions Commercial & Industrial Total Fixed-price $ 554,160 $ 1,388,840 $ 336,786 $ 316,365 $ 2,596,151 Time-and-material 222,314 — 14,310 51,583 288,207 Total revenue $ 776,474 $ 1,388,840 $ 351,096 $ 367,948 $ 2,884,358 Year Ended September 30, 2023 Communications Residential Infrastructure Solutions Commercial & Industrial Total Fixed-price $ 404,684 $ 1,279,504 $ 210,547 $ 241,159 $ 2,135,894 Time-and-material 196,092 — 6,806 38,435 241,333 Total revenue $ 600,776 $ 1,279,504 $ 217,353 $ 279,594 $ 2,377,227 Year Ended September 30, 2022 Communications Residential Infrastructure Solutions Commercial & Industrial Total Fixed-price $ 367,513 $ 1,131,414 $ 159,994 $ 282,522 $ 1,941,443 Time-and-material 192,264 — 7,119 25,982 225,365 Total revenue $ 559,777 $ 1,131,414 $ 167,113 $ 308,504 $ 2,166,808 Accounts Receivable Accounts receivable include amounts which we have billed or have an unconditional right to bill our customers. As of September 30, 2024, accounts receivable included $ 13,660 of unbilled receivables for which we have an unconditional right to bill. Contract Assets and Liabilities Project contracts typically provide for a schedule of billings on percentage of completion of specific tasks inherent in the fulfillment of our performance obligation(s). The schedules for such billings usually do not precisely match the schedule on which costs are incurred. As a result, contract revenue recognized in the statement of operations can and usually does differ from amounts that can be billed to the customer at any point during the contract. Amounts by which cumulative contract revenue recognized on a contract as of a given date exceeds cumulative billings and unbilled receivables to the customer under the contract are reflected as a current asset in our Consolidated Balance Sheets under the caption “Costs and estimated earnings in excess of billings”. Amounts by which cumulative billings to the customer under a contract as of a given date exceed cumulative contract revenue recognized are reflected as a current liability in our Consolidated Balance Sheets under the caption “Billings in excess of costs and estimated earnings”. During the years ended September 30, 2024 and 2023, we recognized revenue of $ 98,564 and $ 82,520 related to our contract liabilities at October 1, 2023 and 2022, respectively. We did not have any impairment losses recognized on our receivables or contract assets for the years ended September 30, 2024, 2023 and 2022. Remaining Performance Obligations Remaining performance obligations represent the unrecognized revenue value of our contract commitments. New awards represent the total expected revenue value of new contract commitments undertaken during a given period, as well as additions to the scope of existing contract commitments. Our new performance obligations vary significantly each reporting period based on the timing of our major new contract commitments. At September 30, 2024, we had remaining performance obligations of $ 1,175,695 . The Company expects to recognize revenue on approximately $ 1,011,974 of the remaining performance obligations over the next 12 months, with the remaining recognized thereafter. For the year ended September 30, 2024, net revenue recognized from our performance obligations satisfied in previous periods was not material. 54 5. PROPERTY AND EQUIPMENT Property and equipment consists of the following: Estimated Useful Lives in Years Year Ended September 30, 2024 2023 Land N/A $ 9,482 $ 4,181 Buildings and improvements 5 - 20 55,805 33,753 Machinery and equipment 3 - 10 117,774 65,787 Information systems 2 - 8 14,968 14,508 Furniture and fixtures 5 - 7 2,976 2,507 Construction in progress 6,578 1,367 Property and equipment, gross $ 207,583 $ 122,103 Less-Accumulated depreciation ( 73,386 ) ( 58,693 ) Property and equipment, net $ 134,197 $ 63,410 Depreciation expense, including amortization of internal-use software, was $ 19,533 , $ 12,121 and $ 10,073 , respectively, for the years ended September 30, 2024, 2023 and 2022. 6. PER SHARE INFORMATION Basic earnings per share is calculated as income (loss) available to common stockholders, divided by the weighted average number of common shares outstanding during the period. If the effect is dilutive, participating securities are included in the computation of basic earnings per share. Our participating securities do not have a contractual obligation to share in the losses in any given period. As a result, these participating securities will not be allocated any losses in the periods of net losses, but will be allocated income in the periods of net income using the two-class method. The following table reconciles the components of the basic and diluted earnings per share for the years ended September 30, 2024, 2023 and 2022: Year Ended September 30, 2024 2023 2022 Numerator: Net income attributable to IES Holdings, Inc. $ 219,116 $ 108,288 $ 34,762 Increase in noncontrolling interest ( 17,140 ) ( 15,701 ) ( 4,695 ) Net income attributable to restricted shareholders of IES Holdings, Inc. — ( 11 ) ( 21 ) Net income attributable to common shareholders of IES Holdings, Inc. $ 201,976 $ 92,576 $ 30,046 Denominator: Weighted average common shares outstanding — basic 20,160,143 20,196,850 20,667,745 Effect of dilutive stock options and non-vested securities 254,789 216,182 226,880 Weighted average common and common equivalent shares outstanding — diluted 20,414,932 20,413,032 20,894,625 Earnings per share attributable to common shareholders of IES Holdings, Inc.: Basic $ 10.02 $ 4.58 $ 1.45 Diluted $ 9.89 $ 4.54 $ 1.44 For the years ended September 30, 2024, 2023 and 2022, the average price of our common stock exceeded the exercise price of outstanding stock options; therefore, all of our outstanding stock options were included in the computation of diluted earnings per share. For the years ended September 30, 2024, 2023 and 2022, there were no other unvested performance awards excluded from the calculation of diluted earnings per share because the inclusion of such instruments would have been anti-dilutive. 55 7. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS Accounts payable and accrued expenses consist of the following: September 30, 2024 2023 Accounts payable, trade $ 149,381 $ 138,591 Accrued compensation and benefits 116,465 90,667 Accrued insurance liabilities 11,158 7,726 Current operating lease liabilities 21,981 19,496 Income taxes payable 22,778 10,414 Other accrued expenses 41,819 29,903 $ 363,582 $ 296,797 8. DEBT We had no outstanding borrowings as of September 30, 2024 or 2023. At September 30, 2024, we had $ 4,756 in outstanding letters of credit and $ 143,381 of availability under our revolving credit facility. Any amounts outstanding under our revolving credit facility are due and payable in September 2026, upon expiration of our revolving credit facility, and all amounts described as available are available without triggering our financial covenants under the Amended Credit Agreement (as defined below). The interest rate under our revolving credit facility was 6.33 % at September 30, 2024. For the years ended September 30, 2024, 2023 and 2022, we incurred interest expense of $ 1,338 , $ 3,022 and $ 2,970 , respectively. The Revolving Credit Facility On April 28, 2022 we entered into the Third Amended and Restated Credit and Security Agreement (the "Amended Credit Agreement"), which, among other things, increased the maximum borrowing amount under our revolving credit facility from $ 125,000 to $ 150,000 . The Amended Credit Agreement also removed the aggregate cap on Company investments in certain securities and the cap on the Company’s ability to make stock repurchases, in each case subject to the satisfaction of certain liquidity requirements. The Amended Credit Agreement, which matures on September 30, 2026, contains customary affirmative, negative and financial covenants. As of September 30, 2024, the Company was in compliance with the financial covenants under the Amended Credit Agreement, requiring that we maintain: • a Fixed Charge Coverage Ratio (as defined in the Amended Credit Agreement), measured quarterly on a trailing four-quarter basis at the end of each quarter, of at least 1.1 to 1.0; and • minimum Liquidity of at least ten percent ( 10 %) of the Maximum Revolver Amount, or $ 15,000 ; with, for purposes of this covenant, at least fifty percent ( 50 %) of our Liquidity comprised of Excess Availability (as defined in the Amended Credit Agreement). At September 30, 2024, our Liquidity was $ 244,213 , our Excess Availability was $ 143,381 (or greater than 50% of minimum Liquidity), and our Fixed Charge Coverage Ratio was 3.4 :1.0. If in the future our Liquidity falls below the amount required by the Amended Credit Agreement (or Excess Availability falls below 50% of our minimum Liquidity), our Fixed Charge Coverage Ratio is less than 1.1 :1.0, or if we otherwise fail to perform or otherwise comply with certain of our covenants or other agreements under the Amended Credit Agreement, it would result in an event of default under the Amended Credit Agreement, which could result in some or all of any indebtedness we may take on becoming immediately due and payable. 9. LEASES We enter into various contractual arrangements for the right to use facilities, vehicles and equipment. The lease term generally ranges from two to ten years for facilities and three to five years for vehicles and equipment. Our lease terms may include the exercise of renewal or termination options when it is reasonably certain these options will be exercised. Our lease agreements do not contain any material residual value guarantees or restrictive covenants. Current operating lease liabilities were $ 21,981 and $ 19,496 , respectively, as of September 30, 2024 and 2023, and current finance lease liabilities were $ 4,563 and $ 4,301 , respectively, as of September 30, 2024 and 2023. Current operating and finance lease 56 liabilities were included in " Accounts payable and accrued expenses " in the Consolidated Balance Sheets as of September 30, 2024 and 2023. Non-current finance lease liabilities and finance lease right-of-use assets were included in the " Other non-current liabilities " and " Other non-current assets ", respectively, in the Consolidated Balance Sheets. The maturities of our lease liabilities as of September 30, 2024, are as follows: Operating Leases Finance Leases Total 2025 $ 22,487 $ 4,701 $ 27,188 2026 18,512 3,916 22,428 2027 13,526 2,148 15,674 2028 7,848 379 8,227 2029 3,591 46 3,637 Thereafter 3,467 — 3,467 Total undiscounted lease payments $ 69,431 $ 11,190 $ 80,621 Less: imputed interest 7,005 896 7,901 Present value of lease liabilities $ 62,426 $ 10,294 $ 72,720 The total future undiscounted cash flows related to lease agreements committed to but not yet commenced as of September 30, 2024, is $ 8,542 . Lease cost recognized in our Consolidated Statements of Comprehensive Income is summarized as follows: Year Ended September 30, 2024 2023 2022 Operating lease cost $ 21,933 $ 18,501 $ 16,000 Finance lease cost Amortization of lease assets 4,370 3,603 1,729 Interest on lease liabilities 553 746 269 Finance lease cost 4,923 4,349 1,998 Short-term lease cost 1,558 1,883 2,426 Variable lease cost 4,518 2,805 1,900 Total lease cost $ 32,932 $ 27,538 $ 22,324 Other information about lease amounts recognized in our Consolidated Financial Statements is summarized as follows: Year Ended September 30, 2024 2023 2022 Operating cash flows used for operating leases $ 24,381 $ 22,022 $ 20,799 Operating cash flows used for finance leases 553 746 269 Right-of-use assets obtained in exchange for new operating lease liabilities 21,795 27,491 31,422 Right-of-use assets obtained in exchange for new finance lease liabilities 1,678 5,973 7,950 Year Ended September 30, 2024 2023 Weighted-average remaining lease term - operating leases 3.8 years 4.5 years Weighted-average remaining lease term - finance leases 2.7 years 3.4 years Weighted-average discount rate - operating leases 5.5 % 5.1 % Weighted-average discount rate - finance leases 6.2 % 6.0 % For a discussion of leases with certain related parties which are included above, see Note 13, “Related-Party Transactions.” Rent expense was $ 23,491 , $ 20,384 and $ 18,426 for the years ended September 30, 2024, 2023 and 2022, respectively. 57 10. INCOME TAXES Federal and state income tax provisions are as follows: Year Ended September 30, 2024 2023 2022 Federal: Current $ 53,318 $ 27,205 $ 9,401 Deferred 2,672 4,300 3 State: Current 14,603 6,370 3,445 Deferred 1,572 886 ( 34 ) Total provision for income taxes $ 72,165 $ 38,761 $ 12,815 Actual income tax expense differs from income tax expense computed by applying the U.S. federal statutory corporate rate to income (loss) before income taxes as follows: Year Ended September 30, 2024 2023 2022 Provision at the federal statutory rate $ 63,980 $ 33,295 $ 11,130 Increase resulting from: Non-deductible expenses 4,285 2,017 1,610 State income taxes, net of federal deduction 11,952 6,338 2,114 Contingent tax liabilities — 396 — Change in valuation allowance 138 — 283 Other 743 — 427 Decrease resulting from: Share-based compensation ( 601 ) ( 332 ) ( 665 ) Noncontrolling interest ( 2,811 ) ( 2,415 ) ( 1,139 ) Change in valuation allowance — ( 52 ) — Contingent tax liabilities ( 5,521 ) — ( 133 ) Component 2 goodwill utilization — — ( 812 ) Other — ( 486 ) — Total provision for income taxes $ 72,165 $ 38,761 $ 12,815 58 Deferred income tax provisions result from temporary differences in the recognition of income and expenses for financial reporting purposes and for income tax purposes. The income tax effects of these temporary differences, representing deferred income tax assets and liabilities, result principally from the following: September 30, 2024 2023 Deferred income tax assets: Allowance for credit losses $ 371 $ 349 Accrued expenses 19,415 18,167 Net operating loss carryforward 2,701 4,224 Various reserves 2,073 1,718 Intangible assets 390 — Partnerships 7,200 7,539 Share-based compensation 1,364 1,298 Lease asset 15,630 14,207 Other 1,068 1,057 Subtotal 50,212 48,559 Less valuation allowance 961 823 Total deferred income tax assets 49,251 47,736 Deferred income tax liabilities: Property and equipment 10,319 2,231 Intangible assets — 9,984 Lease liability 15,475 14,102 Other 999 1,036 Total deferred income tax liabilities 26,793 27,353 Net deferred income tax assets $ 22,458 $ 20,383 In fiscal 2024 and 2023, the valuation allowance on our deferred tax assets increased by $ 138 and decreased by $ 52 , respectively, which is included in “Provision for income taxes” in our Consolidated Statements of Comprehensive Income. As of September 30, 2024, we had available approximately $ 4,493 of federal net tax operating loss carry forward for federal income tax purposes. This carry forward, which may provide future tax benefits, is subject to an annual limitation of $ 709 under Section 382 of the Internal Revenue Code and will begin to expire in 2029. As of September 30, 2024, we had available approximately $ 40,085 state net tax operating loss carry forwards, including $ 1,665 from net operating losses on which no tax benefit has been recognized and has not been recorded as a deferred tax asset. The significant majority of these carry forwards, which may provide future tax benefits, will not begin to expire until 2026. We have provided valuation allowances on all net operating losses where it is determined it is more likely than not that they will expire without being utilized. In assessing the realizability of deferred tax assets at September 30, 2024, we considered whether it was more likely than not that some portion or all of the deferred tax assets will not be realized. Our realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which these temporary differences become deductible. As a result, we have recorded a net deferred tax asset of $ 22,458 on our Consolidated Balance Sheets. We will continue to evaluate the appropriateness of our remaining deferred tax assets and need for valuation allowances on a quarterly basis. GAAP requires financial statement reporting of the expected future tax consequences of uncertain tax return reporting positions on the presumption that all relevant tax authorities possess full knowledge of those tax reporting positions, as well as all of the pertinent facts and circumstances, but it prohibits discounting of any of the related tax effects for the time value of money. The evaluation of a tax position is a two-step process. The first step is the recognition process to determine if it is more likely than not that a tax position will be sustained upon examination by the appropriate taxing authority, based on the technical merits of the position. The second step is a measurement process whereby a tax position that meets the more likely than not recognition threshold is calculated to determine the amount of benefit/expense to recognize in the financial statements. The tax position is measured at the largest amount of benefit/expense that is more likely than not of being realized upon ultimate settlement. 59 A reconciliation of the beginning and ending balances of unrecognized tax benefit is as follows: Year Ended September 30, 2024 2023 Balance at beginning of period $ 22,347 $ 21,746 Additions for positions of prior years 1,655 819 Reduction resulting from the lapse of the applicable statutes of limitations ( 7,121 ) ( 218 ) Balance at end of period $ 16,881 $ 22,347 As of September 30, 2024 and 2023, $ 16,881 and $ 22,347 , respectively, of unrecognized tax benefits would result in a decrease in the provision for income tax expense. We anticipate that approximately $ 10,792 in liabilities for unrecognized tax benefits, including accrued interest, primarily from net operating losses on which no tax benefit has been recognized, may be reversed in the next twelve months. The reversal is predominantly due to the expiration of the statutes of limitation for unrecognized tax benefits. We had approximately $ 1,452 and $ 697 accrued for the payment of interest and penalties at September 30, 2024 and 2023, respectively. We recognize interest and penalties related to unrecognized tax benefits as part of the provision for income taxes. The tax years ended September 30, 2021, and forward are subject to federal audit as are tax years prior to September 30, 2021, to the extent of unutilized net operating losses generated in those years. The tax years ended September 30, 2020, and forward are subject to state audits as are tax years prior to September 30, 2020, to the extent of unutilized net operating losses generated in those years. 11. OPERATING SEGMENTS We manage and measure performance of our business in four distinct operating segments: Communications, Residential, Infrastructure Solutions and Commercial & Industrial. These segments are reflective of how the Company’s CODM reviews operating results for the purposes of allocating resources and assessing performance. The Company’s CODM is its Chief Executive Officer. Transactions between segments, if any, are eliminated in consolidation. Our corporate office provides general and administrative services, as well as support services, to our four operating segments. Management allocates certain shared costs among segments for selling, general and administrative expenses and depreciation expense. Segment information for the years ended September 30, 2024, 2023 and 2022 is as follows: Year Ended September 30, 2024 Communications Residential Infrastructure Solutions Commercial & Industrial Corporate Total Revenues $ 776,474 $ 1,388,840 $ 351,096 $ 367,948 $ — $ 2,884,358 Cost of services 623,844 1,024,440 245,743 293,741 — 2,187,768 Gross profit 152,630 364,400 105,353 74,207 — 696,590 Selling, general and administrative 65,752 228,371 37,394 32,925 32,242 396,684 Contingent consideration — 36 678 — — 714 Gain on sale of assets ( 18 ) ( 1,354 ) ( 184 ) ( 114 ) ( 14 ) ( 1,684 ) Income (loss) from operations $ 86,896 $ 137,347 $ 67,465 $ 41,396 $ ( 32,228 ) $ 300,876 Other data: Depreciation and amortization expense $ 3,627 $ 20,752 $ 9,783 $ 2,028 $ 913 $ 37,103 Capital expenditures $ 13,493 $ 15,620 $ 8,916 $ 5,205 $ 1,925 $ 45,159 Total assets $ 285,478 $ 395,682 $ 288,765 $ 89,023 $ 185,078 $ 1,244,026 60 Year Ended September 30, 2023 Communications Residential Infrastructure Solutions Commercial & Industrial Corporate Total Revenues $ 600,776 $ 1,279,504 $ 217,353 $ 279,594 $ — $ 2,377,227 Cost of services 494,964 1,026,524 162,905 248,295 — 1,932,688 Gross profit 105,812 252,980 54,448 31,299 — 444,539 Selling, general and administrative 54,344 169,737 26,260 25,225 23,059 298,625 Contingent consideration — 277 — — — 277 Loss (gain) on sale of assets 12 69 ( 1,029 ) ( 13,198 ) 7 ( 14,139 ) Income (loss) from operations $ 51,456 $ 82,897 $ 29,217 $ 19,272 $ ( 23,066 ) $ 159,776 Other data: Depreciation and amortization expense $ 2,215 $ 19,281 $ 5,198 $ 1,640 $ 1,073 $ 29,407 Capital expenditures $ 2,203 $ 9,114 $ 2,767 $ 2,525 $ 1,058 $ 17,667 Total assets $ 205,924 $ 386,829 $ 180,871 $ 87,677 $ 120,299 $ 981,600 Year Ended September 30, 2022 Communications Residential Infrastructure Solutions Commercial & Industrial Corporate Total Revenues $ 559,777 $ 1,131,414 $ 167,113 $ 308,504 $ — $ 2,166,808 Cost of services 490,959 928,161 138,444 290,314 — 1,847,878 Gross profit 68,818 203,253 28,669 18,190 — 318,930 Selling, general and administrative 46,717 144,100 25,129 30,557 16,211 262,714 Contingent consideration — 277 — — — 277 Loss (gain) on sale of assets 12 20 ( 46 ) ( 55 ) — ( 69 ) Income (loss) from operations $ 22,089 $ 58,856 $ 3,586 $ ( 12,312 ) $ ( 16,211 ) $ 56,008 Other data: Depreciation and amortization expense $ 1,550 $ 15,617 $ 5,575 $ 2,561 $ 165 $ 25,468 Capital expenditures $ 2,004 $ 10,054 $ 14,729 $ 1,890 $ 578 $ 29,255 Total assets $ 210,875 $ 394,757 $ 161,828 $ 114,529 $ 52,720 $ 934,709 12. STOCKHOLDERS’ EQUITY Equity Incentive Plan The Company’s 2006 Equity Incentive Plan, as amended and restated (the “Equity Incentive Plan”), provides for grants of stock options as well as grants of stock, including restricted stock. Approximately 3.0 million shares of common stock are authorized for issuance under the Equity Incentive Plan, of which approximately 581,169 shares were available for issuance at September 30, 2024. We measure and record compensation expense for all share-based payment awards based on the fair value of the awards granted at the date of grant. The fair value of restricted stock awards and phantom stock unit awards is determined based on the number of shares granted and the closing price of IES’s common stock on the date of grant. For awards vesting upon achievement of a market condition, the likelihood of achieving that market condition is considered in determining the fair value of the grant, which we expense ratably over the vesting period. For awards vesting upon achievement of a performance condition, we record expense based on the grant date fair value when it becomes probable the performance condition will be achieved. Forfeitures are recorded in the period in which they occur. The resulting compensation expense is recognized on a straight-line basis over the requisite service period, which is generally the vesting period. Stock Repurchase Program In 2015, our Board authorized a stock repurchase program for the purchase from time to time of up to 1.5 million shares of the Company’s common stock, and in 2019, our Board authorized the repurchase from time to time of an additional 1.0 million shares of the Company's common stock under the stock repurchase program. In December 2022, our Board of Directors terminated our previous stock repurchase program and authorized a new $ 40,000 stock repurchase program. On July 31, 2024, the Board authorized a new $ 200,000 stock repurchase program after the $ 40,000 stock repurchase program was fully utilized. Share purchases are made for cash 61 in open market transactions at prevailing market prices or in privately negotiated transactions or otherwise. The timing and amount of purchases under the program are determined based upon prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. All or part of the repurchases may be implemented under a Rule 10b5-1 trading plan, which allows repurchases under predetermined terms at times when the Company might otherwise be prevented from purchasing under insider trading laws or because of self-imposed blackout periods. The program does not require the Company to purchase any specific number of shares and may be modified, suspended or reinstated at any time at the Company’s discretion and without notice. We repurchased 289,284 and 224,013 shares of our common stock in open market transactions at an average price of $ 136.34 and $ 31.06 per share during the years ended September 30, 2024 and 2023, respectively. Treasury Stock During the year ended September 30, 2024, we issued 104,600 shares of treasury stock to employees and repurchased 40,308 shares of common stock from our employees to satisfy statutory tax withholding requirements upon the vesting of certain performance phantom stock units under the Equity Incentive Plan. We also repurchased 289,284 shares of common stock on the open market pursuant to our stock repurchase program. During the year ended September 30, 2024, we issued 2,500 shares of treasury stock to satisfy the exercise of outstanding options, of which 56 shares were repurchased to pay the exercise price of options. We had no outstanding unexercised stock options remaining as of September 30, 2024. During the year ended September 30, 2023, we issued 105,755 shares of treasury stock to employees and repurchased 32,158 shares of common stock from our employees to satisfy statutory tax withholding requirements upon the vesting of certain performance phantom stock units under the Equity Incentive Plan. We also repurchased 224,013 shares of common stock on the open market pursuant to our stock repurchase program, and 266 shares of restricted stock awards were forfeited by former employees and returned to treasury stock. During the year ended September 30, 2023, we issued 3,000 unrestricted shares to satisfy the exercise of outstanding options. Restricted Stock We did not have any unvested restricted stock awards outstanding or related activity during the year ended September 30, 2024. A summary of restricted stock awards for the years ended September 30, 2023 and 2022 is provided in the table below: Year Ended September 30, 2023 2022 Unvested at beginning of year 13,639 16,757 Granted — — Vested ( 13,373 ) ( 3,118 ) Forfeited ( 266 ) — Unvested at end of year — 13,639 The fair value of shares vesting during the years ended September 30, 2023 and 2022 was $ 461 and $ 150 , respectively. Fair value was calculated as the number of shares vested times the market price of shares on the date of vesting. All the restricted shares granted under the Equity Incentive Plan (vested or unvested) participate in dividends issued to common shareholders, if any. Director Phantom Stock Units Director phantom stock units (“Director PSUs”) are primarily granted to the members of the Board of Directors as part of their overall compensation. These Director PSUs are contractual rights to receive one share of the Company's common stock and are paid via unrestricted stock grants to each director upon their departure from the Board of Directors. We record compensation expense for the full value of the grant on the date of grant. Employee Phantom Stock Units An employee phantom stock unit (an “Employee PSU”) is a contractual right to receive one share of the Company’s common stock. Depending on the terms of each grant, Employee PSUs may vest upon the achievement of certain specified performance objectives and continued performance of services, or may vest based on continued performance of services through the vesting date. 62 The vesting of these awards is subject to either the achievement of specified levels of cumulative net income before taxes (a performance condition) or specified stock price levels (a market condition) and continued performance of services, or based on continued performance of services through the vesting date alone. For stock awards where vesting depends on achievement of a performance condition, we record expense when we conclude it is probable that the performance condition will be met. At September 30, 2024, it is deemed probable that the portion of the awards that vest based on performance conditions will vest. A summary of Employee PSU activity for the year ended September 30, 2024, which are subject to the achievement of certain performance metrics, is provided in the table below: Unvested at September 30, 2023 325,813 Granted 86,563 Vested ( 99,579 ) Forfeited ( 12,496 ) Unvested at September 30 , 2024 300,301 A summary of the compensation expense related to our stock awards recognized during the years ended September 30, 2024, 2023 and 2022 is provided in the table below: Year Ended September 30, 2024 2023 2022 Restricted stock awards $ — $ 23 $ 137 Director PSUs $ 495 $ 386 $ 386 Employee PSUs $ 5,037 $ 3,963 $ 3,251 13. RELATED-PARTY TRANSACTIONS The Company is a party to a sublease agreement with Tontine Associates, for corporate office space in Greenwich, Connecticut. In December 2022, the Company entered into an amendment of the sublease agreement, which was set to terminate on February 28, 2023, to extend the term of the agreement through August 31, 2024 and to increase the monthly payments from approximately $8 to approximately $9 effective March 1, 2023. On August 1, 2024, the Company entered into an amendment of the sublease agreement to extend the term of the agreement through September 30, 2025, effective September 1, 2024. Payments by the Company are at a rate consistent with that paid by Tontine Associates to its landlord. See Note 3, “Con trolling Shareholder” for additional information regarding Tontine. 14. EMPLOYEE BENEFIT PLANS 401(k) Plan In November 1998, we established the IES Holdings, Inc. 401(k) Retirement Savings Plan. All full-time IES employees are eligible to participate on the first day of the month subsequent to completing sixty days of service and attaining age twenty-one. Participants become vested in our matching contributions following three years of service. We also maintain several subsidiary retirement savings plans. We recognized $ 6,163 , $ 5,309 , and $ 4,494 in matching expenses in fiscal years 2024, 2023 and 2022, respectively. Executive Savings Plan Under the Executive Deferred Compensation Plan adopted on July 1, 2004 (the “Executive Savings Plan”), certain employees are permitted to defer a portion (up to 75%) of their base salary and/or bonus for a plan year. The Human Resources and Compensation Committee of the Board of Directors may, in its sole discretion, credit one or more participants with an employer deferral (contribution) in such amount as the Committee may choose (“Employer Contribution”). The Employer Contribution, if any, may be a fixed dollar amount, a fixed percentage of the participant’s compensation, base salary, or bonus, or a “matching” amount with respect to all or part of the participant’s elective deferrals for such plan year, and/or any combination of the foregoing as the Committee may choose. No compensation earned during the years ended September 30, 2024, 2023 and 2022 was deferred under this plan. 63 Multiemployer Pension Plan The Infrastructure Solutions segment participates in a multiemployer direct benefit pension plan for employees covered under one of our collective bargaining agreements. We do not administer the plan. We do not significantly participate in this plan. As of December 31, 2023, this plan was funded at 92.57 %. 15. FAIR VALUE MEASUREMENTS Fair value is considered the price to sell an asset, or transfer a liability, between market participants on the measurement date. Fair value measurements assume that (1) the asset or liability is exchanged in an orderly manner, (2) the exchange is in the principal market for that asset or liability, and (3) the market participants are independent, knowledgeable, able and willing to transact an exchange. Fair value accounting and reporting establishes a framework for measuring fair value by creating a hierarchy for observable independent market inputs and unobservable market assumptions and expands disclosures about fair value measurements. Judgment is required to interpret the market data used to develop fair value estimates. As such, the estimates presented herein are not necessarily indicative of the amounts that could be realized in a current exchange. The use of different market assumptions and/or estimation methods could have a material effect on the estimated fair value. At September 30, 2024, financial assets and liabilities measured at fair value on a recurring basis were limited to investments in equity securities and debt securities classified as trading securities, our Executive Savings Plan, under which certain employees are permitted to defer a portion of their base salary and/or bonus for a Plan Year (as defined in the plan), and contingent consideration liabilities related to certain of our acquisitions. Financial assets (liabilities) measured at fair value on a recurring basis as of September 30, 2024 and 2023, are summarized in the following tables by the type of inputs applicable to the fair value measurements: September 30 , 2024 Total Fair Value Quoted Prices (Level 1) Significant Unobservable (Level 3) Equity securities $ 31,639 $ 31,639 $ — Debt securities classified as trading securities 3,364 3,364 — Executive savings plan assets 986 986 — Executive savings plan liabilities ( 852 ) ( 852 ) — Contingent consideration liability ( 3,468 ) — ( 3,468 ) Total $ 31,669 $ 35,137 $ ( 3,468 ) September 30, 2023 Total Fair Value Quoted Prices (Level 1) Significant Unobservable (Level 3) Executive savings plan assets $ 783 $ 783 $ — Executive savings plan liabilities ( 657 ) ( 657 ) — Contingent consideration liability ( 4,465 ) — ( 4,465 ) Total $ ( 4,339 ) $ 126 $ ( 4,465 ) Investments in equity securities and debt securities, all of which are classified as trading securities and mature after one year and before five years at September 30, 2024, were included in “Marketable securities” in our Consolidated Balance Sheets. Gains and losses to measure our investments in equity and debt securities at fair value were included in Other (income) expense, net in our Consolidated Statements of Comprehensive Income. Our unrealized net gains (losses), which are calculated as total net gains (losses) recognized during the period less net gains (losses) recognized on securities sold during the period, were as follows: Year Ended September 30, 2024 2023 2022 Unrealized gain on equity securities $ 1,492 $ — $ — Unrealized gain on debt securities 297 — — Total unrealized gain on trading securities $ 1,789 $ — $ — 64 On April 1, 2024 , we entered into a contingent consideration arrangement valued at $ 2,790 in connection with the acquisition of Greiner Industries, Inc. For more information, refer to Note 19, “Business Combinations and Divestitures.” The contingent consideration obligation related to Bayonet, which was acquired in fiscal year 2021, was settled in cash for $ 4,500 in December 2023. Net adjustments to fair value of such liabilities were included in Contingent consideration in our Consolidated Statements of Comprehensive Income. The table below presents the fair value of this obligation, which used significant unobservable inputs (Level 3). Contingent Consideration Agreement Fair value at September 30, 2022 $ ( 4,323 ) Net adjustments to fair value ( 142 ) Fair value at September 30, 2023 $ ( 4,465 ) Acquisitions ( 2,790 ) Net adjustments to fair value ( 713 ) Settlements 4,500 Fair value at September 30, 2024 $ ( 3,468 ) Below is a description of the inputs used to value the assets summarized in the preceding tables: Level 1 — Inputs represent unadjusted quoted prices for identical assets exchanged in active markets. Level 2 — Inputs include directly or indirectly observable inputs other than Level 1 inputs such as quoted prices for similar assets exchanged in active or inactive markets; quoted prices for identical assets exchanged in inactive markets; and other inputs that are considered in fair value determinations of the assets. Level 3 — Inputs include unobservable inputs used in the measurement of assets. Management is required to use its own assumptions regarding unobservable inputs because there is little, if any, market activity in the assets or related observable inputs that can be corroborated at the measurement date. 16. INVENTORY Inventories consist of the following components: September 30, 2024 2023 Raw materials $ 14,078 $ 14,334 Work in process 12,494 12,939 Finished goods 4,389 3,399 Parts and supplies 70,767 64,983 Total inventories $ 101,728 $ 95,655 17. GOODWILL AND INTANGIBLE ASSETS Goodwill The following summarizes changes in the carrying value of goodwill by segment during the year ended September 30, 2024. The carrying value of goodwill was unchanged during the year ended September 30, 2023. Communications Residential Infrastructure Solutions Commercial & Industrial Total Balance at September 30, 2023 2,816 51,370 38,209 — 92,395 Acquisitions (Note 19) — — 1,565 — 1,565 Balance at September 30, 2024 $ 2,816 $ 51,370 $ 39,774 $ — $ 93,960 65 Based on the results of our annual goodwill impairment assessment at September 30, 2024, we concluded the fair value of each of our reporting units exceeded its book value, and therefore we recorded no impairment charges for the year ended September 30, 2024. As of September 30, 2024 and 2023, we had accumulated impairment losses of $ 6,976 related to our Commercial & Industrial segment. Intangible Assets Intangible assets consist of the following: September 30 , 2024 Estimated Useful Lives (in Years) Gross Carrying Amount Accumulated Amortization Net Trademarks/trade names 5 - 20 $ 13,821 $ ( 6,964 ) $ 6,857 Technical library 20 400 ( 221 ) 179 Customer relationships 1 - 15 92,796 ( 54,478 ) 38,318 Backlog and construction contracts 1 - 2 750 ( 214 ) 536 Total $ 107,767 $ ( 61,877 ) $ 45,890 September 30, 2023 Estimated Useful Lives (in Years) Gross Carrying Amount Accumulated Amortization Net Trademarks/trade names 5 - 20 $ 14,621 $ ( 6,973 ) $ 7,648 Technical library 20 400 ( 201 ) 199 Customer relationships 6 - 15 91,426 ( 43,065 ) 48,361 Non-competition arrangements 5 40 ( 40 ) — Backlog and construction contracts 1 4,958 ( 4,958 ) — Total $ 111,445 $ ( 55,237 ) $ 56,208 For the years ended September 30, 2024, 2023 and 2022, amortization expense of intangible assets was $ 13,200 , $ 13,684 and $ 13,666 , respectively. Our estimated future amortization expense for years ending September 30 is as follows: Year Ending September 30, 2025 $ 13,284 2026 11,942 2027 8,466 2028 5,491 2029 2,823 Thereafter 3,884 Total $ 45,890 18. COMMITMENTS AND CONTINGENCIES Legal Matters From time to time we are a party to various claims, lawsuits and other legal proceedings that arise in the ordinary course of business. We maintain various insurance coverages to minimize financial risk associated with these proceedings. None of these proceedings, separately or in the aggregate, are expected to have a material adverse effect on our financial position, results of operations or cash flows. With respect to all such proceedings, we record reserves when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. We expense routine legal costs related to these proceedings as they are incurred. In the course of performing work as a subcontractor, from time to time we may be involved in projects which are the subject of contractual disputes between the general contractor and project owner, or between us and the general contractor. In such cases, 66 payment of amounts owed to us by the general contractor may be delayed as contractual disputes are resolved through mediation, arbitration, or litigation. Such disputes may cause us to incur legal fees and other expenses to enforce our contractual rights, and we may not prevail in recovering all amounts to which we believe we are contractually entitled. Risk Management We retain the risk for workers’ compensation, employer’s liability, automobile liability, construction defects, general liability and employee group health claims, as well as pollution coverage, resulting from uninsured deductibles per accident or occurrence which are generally subject to annual aggregate limits. Our general liability program provides coverage for bodily injury and property damage. In many cases, we insure third parties, including general contractors, as additional insured parties under our insurance policies. Losses are accrued based upon our known claims incurred and an estimate of claims incurred but not reported. As a result, many of our claims are effectively self-insured. Many claims against our insurance are in the form of litigation. At September 30, 2024 and 2023, we had $ 11,158 and $ 7,726 , respectively, accrued for self-insurance liabilities. We are also subject to construction defect liabilities, primarily within our Residential segment. Because these accruals are based on judgment and estimates, and involve variables that are inherently uncertain, such as the outcome of litigation and an assessment of insurance coverage, there can be no assurance that the ultimate liability will not be higher or lower than such estimates. Some of the underwriters of our casualty insurance program require us to post letters of credit as collateral. This is common in the insurance industry. To date, we have not had a situation where an underwriter has had reasonable cause to effect payment under a letter of credit. At September 30, 2024 and 2023, we utilized $ 4,756 and $ 4,166 , respectively, of our outstanding letters of credit to collateralize our insurance program. Surety As of September 30, 2024, the estimated cost to complete our bonded projects was approximately $ 133,863 . We evaluate our bonding requirements on a regular basis, including the terms offered by our sureties. We believe the bonding capacity presently provided by our current sureties is adequate for our current operations and will be adequate for our operations for the foreseeable future. Posting letters of credit in favor of our sureties reduces the borrowing availability under our revolving credit facility. Other Commitments and Contingencies Some of our customers and vendors require us to post letters of credit, or provide intercompany guarantees, as a means of guaranteeing performance under our contracts and ensuring payment by us to subcontractors and vendors. If our customer has reasonable cause to effect payment under a letter of credit, we would be required to reimburse our creditor for the letter of credit. From time to time, we may enter into firm purchase commitments for materials, such as copper or aluminum wire, which we expect to use in the ordinary course of business. These commitments are typically for terms of less than one year and require us to buy minimum quantities of materials at specific intervals at a fixed price over the term. As of September 30, 2024, we did not have any such firm commitments to purchase materials. 19. BUSINESS COMBINATIONS AND DIVESTITURES Business combinations On April 1, 2024 , the Company acquired 100 % of the equity interests of Greiner Industries, Inc. ("Greiner"), a Mount Joy, Pennsylvania-based structural steel fabrication and services company for an aggregate total purchase price of $ 70,334 . Greiner is part of our Infrastructure Solutions segment and continues to operate under the Greiner name. The acquisition of Greiner expands our geographic footprint, adds custom structural steel fabrication to our product offerings, and provides additional capacity for our existing custom engineered product offerings. In addition to cash consideration, net of cash acquired, of $ 67,544 , the aggregate purchase price also includes contingent consideration of up to $ 5,000 upon achievement of certain future earnings targets, which was valued at $ 2,790 as of the date of the acquisition. The fair value of the total consideration for this transaction remains subject to post-closing adjustments as of the date of this Annual Report on Form 10-K. 67 The Company accounted for the transaction under the acquisition method of accounting, which requires recording assets and liabilities at fair value (Level 3). The total purchase price, and the allocation thereof to the assets acquired and liabilities assumed, is preliminary and subject to change pending the finalization of post-closing working capital adjustments. The preliminary valuation of the assets acquired and liabilities assumed is as follows: Trade receivables $ 13,971 Other current assets 10,115 Property and equipment 48,209 Intangible assets 2,900 Goodwill 1,565 Current liabilities ( 6,426 ) Net assets acquired $ 70,334 In connection with this acquisition, we acquired goodwill of $ 1,565 , all of which is tax deductible, attributable to an assembled workforce and other intangibles that do not qualify for separate recognition. The intangible assets acquired primarily consisted of customer relationships, backlog and trade name with a total weighted-average amortization period of 3.5 years. Greiner contributed $ 34,038 in revenue and $ 2,489 in operating income during the year ended September 30 , 2024 . We completed no acquisitions in fiscal years 2023 and 2022. Divestitures On October 7, 2022, we sold 100 % of the membership interests of STR Mechanical, LLC and its subsidiary Technical Services II, LLC (collectively, “STR”). As a result, we recognized a pre-tax gain of $ 13,045 , which was included in “ Gain on sale of assets ” within our Consolidated Statements of Comprehensive Income for the year ended September 30, 2023. The disposition of STR, which had operated as part of our Commercial & Industrial segment, will not have a material impact on our ongoing results of operations or financial position. 20. SUBSEQUENT EVENTS On October 4, 2024 , we entered into a funding commitment to join a consortium led by Mason Capital Management LLC to acquire the CB&I storage solutions business, a designer and builder of storage facilities, tanks and terminals for energy and industrial markets, from McDermott International, Ltd. Upon close of the transaction, which we expect to occur by the end of calendar year 2024, we expect to make a cash payment of approximately $ 45 million, subject to customary closing adjustments. 68 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.