IES Holdings Inc.

01/30/2026 | Press release | Distributed by Public on 01/30/2026 06:50

Quarterly Report for Quarter Ending December 31, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and the notes thereto, set forth in Part II, Item 8. "Financial Statements and Supplementary Data"as set forth in our Annual Report on Form 10-K for the fiscal year ended September 30, 2025, and the Condensed Consolidated Financial Statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q. The following discussion may contain forward looking statements. For additional information, see "Disclosure Regarding Forward Looking Statements"in Part I of this Quarterly Report on Form 10-Q.
OVERVIEW
Executive Overview
Please refer to Part I, Item 1."Business" of our Annual Report on Form 10-K for the fiscal year ended September 30, 2025, for a discussion of the Company's services and corporate strategy. IES Holdings, Inc., a Delaware corporation, designs and installs integrated electrical and technology systems and provides infrastructure products and services to a variety of end markets, including data centers, residential housing, and commercial and industrial facilities. Our operations are organized into four business segments: Communications, Residential, Infrastructure Solutions and Commercial & Industrial.
Current Market and Operating Conditions
Entering fiscal 2026, our business has benefited from strong demand continuing across many of our key end markets. Backlog across our business segments in the aggregate remains high, reflecting strong demand. Demand with respect to data centers, a key end market served by our Communications, Infrastructure Solutions, and Commercial & Industrial segments, remains particularly strong. However, availability of labor and capacity could constrain the rate at which we are able to grow our business in this end market. While demand is strong for much of our business, our operating segments each have their own unique set of factors influencing demand for our services. Housing affordability challenges from elevated mortgage rates and inflation, concerns around the availability and cost of insurance, and the impact of overall economic uncertainty on consumer confidence have persisted from fiscal 2025 into 2026. As a result, many large home builders have increased their offerings of customer incentives as they focus on maintaining volume through fluctuations in consumer demand. Recently, some home builders have focused on reducing existing inventory of homes rather than starting new projects. Both of these strategies have put pressure on our revenues and gross margins in our single-family business. In the multi-family residential business, higher borrowing costs for project owners in recent years resulted in a reduction in backlog entering fiscal 2026, which we expect to drive a reduction in multi-family residential revenues for fiscal 2026.
RESULTS OF OPERATIONS
We report our operating results across our four operating segments: Communications, Residential, Infrastructure Solutions, and Commercial & Industrial. Expenses associated with our corporate office are classified separately. The following table presents selected historical results of operations of IES Holdings, Inc., including the results of acquired businesses from the dates acquired.
Three Months Ended December 31,
2025 2024
$ % $ %
(Dollars in thousands, Percentage of revenues)
Revenues $ 870,958 100.0 % $ 749,547 100.0 %
Cost of services 650,943 74.7 571,520 76.2
Gross profit 220,015 25.3 178,027 23.8
Selling, general and administrative expenses 121,815 14.0 103,039 13.7
Contingent consideration 129 - 339 -
Loss on sale of assets 338 - 30 -
Operating income 97,733 11.2 74,619 10.0
Interest and other income, net
18,215 2.1 3,045 0.4
Income from operations before income taxes and equity method investment income 115,948 13.3 77,664 10.4
Provision for income taxes
(28,406) (3.3) (19,983) (2.7)
Equity method investment income 4,226 0.5 - -
Net income 91,768 10.5 57,681 7.7
Net income attributable to noncontrolling interest (329) - (1,378) (0.2)
Net income attributable to IES Holdings, Inc. $ 91,439 10.5 % $ 56,303 7.5 %
Consolidated revenues for the three months ended December 31, 2025 were $121.4 million higher than for the three months ended December 31, 2024, an increase of 16.2%, with increases at our Communications, Infrastructure Solutions and Commercial & Industrial segments and a decrease at our Residential segment. See further discussion below of changes in revenues for our individual segments.
Consolidated gross profit for the three months ended December 31, 2025 increased $42.0 million compared to the three months ended December 31, 2024. Our overall gross profit percentage increased to 25.3% during the three months ended December 31, 2025 as compared to 23.8% during the three months ended December 31, 2024. Gross profit as a percentage of revenue increased at our Communications, Infrastructure Solutions and Commercial & Industrial segments and decreased at our Residential segment. See further discussion below of changes in gross margin for our individual segments.
During the three months ended December 31, 2025, our selling, general and administrative expenses were $121.8 million, an increase of $18.8 million, or 18.2%, over the three months ended December 31, 2024, driven primarily by increased personnel costs across our operating segments to support their growth, increased incentive compensation in connection with higher earnings than in the prior fiscal year and continued investment in technology to support the scalability of the business. Selling, general and administrative expenses as a percentage of revenue increased from 13.7% for the three months ended December 31, 2024 to 14.0% for the three months ended December 31, 2025.
Communications
Three Months Ended December 31,
2025 2024
$ % $ %
(Dollars in thousands, Percentage of revenues)
Revenues $ 351,920 100.0 % $ 232,960 100.0 %
Cost of services 265,530 75.5 184,149 79.0
Gross profit 86,390 24.5 48,811 21.0
Selling, general and administrative expenses 28,440 8.1 20,238 8.7
(Gain) loss on sale of assets
513 0.1 (38) -
Operating income $ 57,437 16.3 % $ 28,611 12.3 %
Revenues. Our Communications segment's revenues increased by $119.0 million, or 51.1%, during the three months ended December 31, 2025, compared to the three months ended December 31, 2024. Continued strong demand in the data center market was the primary driver of the increase, while demand in the distribution center market also continued to grow.
Gross Profit. Our Communications segment's gross profit during the three months ended December 31, 2025 increased by $37.6 million, or 77.0%, as compared to the three months ended December 31, 2024. Gross profit as a percentage of revenue increased from 21.0% to 24.5%. The increase in gross profit and gross margin primarily reflects strong demand as discussed above, successful project execution and improved margins on projects well-suited to our skilled workforce.
Selling, General and Administrative Expenses.Our Communications segment's selling, general and administrative expenses increased by $8.2 million, or 40.5%, during the three months ended December 31, 2025, compared to the three months ended December 31, 2024. The increase primarily reflects higher personnel cost to support business growth and higher incentive compensation as a result of higher earnings. Selling, general and administrative expenses as a percentage of revenue was 8.1% for the three months ended December 31, 2025 compared with 8.7% during the three months ended December 31, 2024 as we benefited from the increased scale of our operations.
Residential
Three Months Ended December 31,
2025 2024
$ % $ %
(Dollars in thousands, Percentage of revenues)
Revenues $ 284,044 100.0 % $ 319,971 100.0 %
Cost of services 221,111 77.8 240,843 75.3
Gross profit 62,933 22.2 79,128 24.7
Selling, general and administrative expenses 54,082 19.0 55,312 17.3
Gain on sale of assets (11) - (7) -
Operating income $ 8,862 3.1 % $ 23,823 7.4 %
Revenues. Our Residential segment's revenues decreased by $35.9 million, or 11.2%, during the three months ended December 31, 2025, compared to the three months ended December 31, 2024. Our single-family electrical revenues decreased by $32.2 million compared to the prior year period. Consumer demand in the single-family housing market was impacted by housing affordability challenges, availability and cost of insurance, and overall economic uncertainty, leading to a decline in construction volumes and pressure on pricing during the period. Our multi-family revenues also decreased by $12.4 million, driven by a reduction in backlog resulting from the impact of elevated interest rates on demand. Our single-family plumbing and HVAC revenue increased by $8.7 million compared to the prior year period as the general decrease in demand for single-family housing was offset by continued expansion of our plumbing and HVAC business into new markets, as well as improved market conditions for these services in certain markets.
Gross Profit.During the three months ended December 31, 2025, our Residential segment's gross profit decreased by $16.2 million, or 20.5%, compared to the three months ended December 31, 2024. The decrease in gross profit reflects the decline in volume as discussed above and reduced pricing to our customers. Gross profit as a percentage of revenue was 22.2% during the three months ended December 31, 2025, compared to 24.7% during the three months ended December 31, 2024.
Selling, General and Administrative Expenses.Our Residential segment's selling, general and administrative expenses decreased by $1.2 million, or 2.2%, during the three months ended December 31, 2025, compared to the three months ended December 31, 2024. The decrease was primarily driven by reduced incentive compensation expense in connection with lower profitability, partly offset by investments to support the future scalability of our business. Selling, general and administrative expenses as a percentage of revenue increased to 19.0% during the three months ended December 31, 2025, compared to 17.3% during the three months ended December 31, 2024. The increase as a percentage of revenue was primarily driven by the decrease in revenues as discussed above.
Infrastructure Solutions
Three Months Ended December 31,
2025 2024
$ % $ %
(Dollars in thousands, Percentage of revenues)
Revenues $ 140,175 100.0 % $ 108,125 100.0 %
Cost of services 89,634 63.9 73,153 67.7
Gross profit 50,541 36.1 34,972 32.3
Selling, general and administrative expenses 14,907 10.6 11,268 10.4
Contingent consideration 129 0.1 339 0.3
(Gain) loss on sale of assets (95) (0.1) 79 0.1
Operating income $ 35,600 25.4 % $ 23,286 21.5 %
Revenues. Revenues in our Infrastructure Solutions segment increased by $32.1 million, or 29.6%, during the three months ended December 31, 2025 compared to the three months ended December 31, 2024. The increase in revenue was driven primarily by continued strong demand in our custom engineered solutions manufacturing businesses, including generator enclosures for data center customers, as well as expansion of our field services offerings.
Gross Profit. Our Infrastructure Solutions segment's gross profit during the three months ended December 31, 2025 increased by $15.6 million, or 44.5%, compared to the three months ended December 31, 2024, and gross profit as a percentage of revenue increased to 36.1% for the three months ended December 31, 2025 compared to 32.3% for the three months ended December 31, 2024. The improvement in gross profit and gross margin primarily reflects the impact of investments we have made over the last
several years to increase capacity to meet increasing demand. In addition, improved pricing and productivity improvements as our newer facilities ramped up production contributed to increased profitability.
Selling, General and Administrative Expenses. Our Infrastructure Solutions segment's selling, general and administrative expenses during the three months ended December 31, 2025 increased by $3.6 million, or 32.3%, compared to the three months ended December 31, 2024, primarily as a result of the growth of the business. Selling, general and administrative expenses as a percentage of revenue increased from 10.4% for the three months ended December 31, 2024 to 10.6% for the three months ended December 31, 2025.
Commercial & Industrial
Three Months Ended December 31,
2025 2024
$ % $ %
(Dollars in thousands, Percentage of revenues)
Revenues $ 94,819 100.0 % $ 88,491 100.0 %
Cost of services 74,668 78.7 73,375 82.9
Gross profit 20,151 21.3 15,116 17.1
Selling, general and administrative expenses 10,517 11.1 8,064 9.1
Gain on sale of assets (69) (0.1) (4) -
Operating income $ 9,703 10.2 % $ 7,056 8.0 %
Revenues. Revenues in our Commercial & Industrial segment increased by $6.3 million, or 7.2%, during the three months ended December 31, 2025, compared to the three months ended December 31, 2024. The increase was primarily driven by continued strong demand and successful execution of backlog, particularly in the data center end market, as well as expansion of one of our operations in the Midwest market.
Gross Profit. Our Commercial & Industrial segment's gross profit during the three months ended December 31, 2025 increased by $5.0 million, or 33.3%, compared to the three months ended December 31, 2024. Gross profit as a percentage of revenue was 21.3% for the three months ended December 31, 2025 compared with 17.1% for the three months ended December 31, 2024 as we benefitted from strong execution on certain large projects.
Selling, General and Administrative Expenses. Our Commercial & Industrial segment's selling, general and administrative expenses during the three months ended December 31, 2025 increased by $2.5 million, or 30.4%, compared to the three months ended December 31, 2024 primarily as a result of increased employee compensation cost, including higher incentive compensation as a result of successful project execution, as we continue to invest in growth of the business. Selling, general and administrative expenses as a percentage of revenue increased to 11.1% for the three months ended December 31, 2025 compared with 9.1% for the three months ended December 31, 2024.
INTEREST AND OTHER INCOME, NET
Three Months Ended December 31,
2025 2024
(In thousands)
Interest expense $ (313) $ (443)
Deferred financing charges (153) (75)
Total interest expense (466) (518)
Gain on marketable securities
16,855 2,392
Interest income
844 963
Other income, net
982 208
Total other income, net
1,826 1,171
Total interest and other income, net
$ 18,215 $ 3,045
During the three months ended December 31, 2025, we incurred interest expense of $0.5 million primarily comprised of interest on our finance lease agreements and fees on an average letter of credit balance of $9.1 million under our revolving credit facility and an average unused line of credit balance of $290.9 million. This compares to interest expense of $0.5 million for the three months ended
December 31, 2024, primarily comprised of interest on our finance lease agreements and fees on an average letter of credit balance of $5.5 million under our revolving credit facility and an average unused line of credit balance of $144.4 million.
We recorded a net gain on marketable securities of $16.9 million for the three months ended December 31, 2025 compared to $2.4 million for the three months ended December 31, 2024 as a result of an increase in the market value of our holdings.
PROVISION FOR INCOME TAXES
We recorded income tax expense of $28.4 million for the three months ended December 31, 2025, compared to $20.0 million for the three months ended December 31, 2024, driven primarily by increased pretax income.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Management's discussion and analysis of financial condition and results of operations is based on our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q, which have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). The preparation of our Condensed Consolidated Financial Statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities known to exist as of the date of the Condensed Consolidated Financial Statements, and the reported amounts of revenues and expenses recognized during the periods presented. We review all significant estimates affecting our Condensed Consolidated Financial Statements on a recurring basis and record the effect of any necessary adjustments prior to their publication. Judgments and estimates are based on our beliefs and assumptions derived from information available at the time such judgments and estimates are made. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of financial statements. There can be no assurance that actual results will not differ from those estimates. For a discussion of our significant accounting policies, please see our Annual Report on Form 10-K for the fiscal year ended September 30, 2025. Some of the more significant estimates include revenue recognition and business combinations.
There have been no significant changes to our accounting policies as disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2025.
REMAINING PERFORMANCE OBLIGATIONS AND BACKLOG
Remaining performance obligations represent the unrecognized revenue value of our contractual commitments. While backlog is not a defined term under GAAP, it is a common measurement used in our industry, and we believe it improves our ability to forecast future results and identify operating trends that may not otherwise be apparent. Backlog is a measure of revenue that we expect to recognize from work that has yet to be performed on uncompleted contracts and from work that has been contracted but has not started, exclusive of short-term projects. While all of our backlog is supported by documentation from customers, backlog is not a guarantee of future revenues, as contractual commitments may change and our performance may vary. Not all of our work is performed under contracts included in backlog; for example, most of the apparatus repair work that is completed by our Infrastructure Solutions segment is performed under master service agreements on an as-needed basis. Additionally, electrical, plumbing and HVAC installation services for single-family housing at our Residential segment are completed on a short-term basis and are therefore excluded from backlog. In our Communications segment, we have a significant amount of shorter duration projects that can be substantially completed within a quarter. The table below summarizes our remaining performance obligations and backlog (in thousands):
December 31, September 30, June 30, March 31,
2025 2025 2025 2025
Remaining performance obligations $ 1,809,131 $ 1,686,583 $ 1,295,207 $ 1,225,985
Agreements without an enforceable obligation(1)
792,769 687,207 771,593 586,724
Backlog $ 2,601,900 $ 2,373,790 $ 2,066,800 $ 1,812,709
(1) Our backlog contains signed agreements and letters of intent, which we do not have a legal right to enforce prior to work starting. These arrangements are excluded from remaining performance obligations until work begins.
WORKING CAPITAL
During the three months ended December 31, 2025, working capital exclusive of cash, cash equivalents and restricted cash increased by $80.5 million from September 30, 2025, reflecting a $62.7 million increase in current assets excluding cash and a $17.8 million decrease in current liabilities during the period.
During the three months ended December 31, 2025, our current assets exclusive of cash, cash equivalents and restricted cash increased to $1,021.0 million, as compared to $958.3 million as of September 30, 2025. The increase was primarily driven by a $65.3 million increase in marketable securities, as a portion of our excess cash was invested in trading securities. In addition, costs and estimated
earnings in excess of billings increased by $16.6 million, driven by the timing of contract billings. These increases were partly offset by a $23.2 million decrease in accounts receivable including retainage due to the timing of customer billings and project execution at the end of the period.
During the three months ended December 31, 2025, our total current liabilities decreased by $17.8 million to $615.6 million, compared to $633.4 million as of September 30, 2025, primarily driven by a $53.7 million decrease in accounts payable and accrued expenses as a result of the timing of certain large payments, partly offset by a $35.9 million increase in billings in excess of costs and estimated earnings, driven by the timing of contract billings.
Surety
We believe the bonding capacity provided by our sureties is adequate for our current operations and will be adequate for our operations for the foreseeable future. As of December 31, 2025, the estimated cost to complete our bonded projects was approximately $183.8 million.
LIQUIDITY AND CAPITAL RESOURCES
The Revolving Credit Facility
We are a party to the Fourth Amended and Restated Credit Agreement (the "Amended Credit Agreement"), which provides for a revolving line of credit of $300 million, maturing on January 21, 2030.
Under the Amended Credit Agreement, the Company is subject to certain financial covenants including a maximum Consolidated Total Leverage Ratio (as defined in the Amended Credit Agreement) of 3.00 to 1.00 and a minimum Consolidated Interest Coverage Ratio (as defined in the Amended Credit Agreement) of 3.00 to 1.00. As of December 31, 2025, the Company was in compliance with the financial covenants under the Amended Credit Agreement.
Amounts outstanding bear interest at a rate equal to either (1) the Base Rate (which is the greater of the Federal Funds Rate (as defined in the Amended Credit Agreement) and the Prime Rate (as defined in the Amended Credit Agreement)), (2) the Daily Simple SOFR (as defined in the Amended Credit Agreement) or (3) Term SOFR (as defined in the Amended Credit Agreement), plus, in each case, an interest rate margin, which is determined quarterly based on our Consolidated Total Leverage Ratio, in accordance with the following thresholds:
Pricing Level Consolidated Total Leverage Ratio Interest Margin applicable to Daily Simple SOFR/Term SOFR Interest Margin applicable to Base Rate
I
Greater than or equal to 2.50 to 1.00
2.25 percentage points
1.25 percentage points
II
Greater than or equal to 1.75 to 1.00, but less than 2.50 to 1.00 2.00 percentage points
1.00 percentage points
III
Greater than or equal to 1.00 to 1.00, but less than 1.75 to 1.00
1.75 percentage points
0.75 percentage points
IV Less than 1.00 to 1.00 1.50 percentage points 0.50 percentage points
In addition, we are charged monthly in arrears an unused commitment fee of 0.25% to 0.35% per annum on any unused portion of the revolving credit facility based on the Company's Consolidated Total Leverage Ratio.
The Amended Credit Agreement restricts certain types of transactions when the Company's Consolidated Total Leverage Ratio, after giving pro forma effect thereto, exceeds 2.75 to 1.00. The Amended Credit Agreement continues to contain other customary affirmative and negative covenants as well as events of default.
Under the Amended Credit Agreement, if in the future our Consolidated Total Leverage Ratio is greater than 3.00:1.00, or our Consolidated Interest Coverage Ratio is less than 3.00:1.00, or if we otherwise fail to perform or otherwise comply with certain of our covenants or other agreements under the Amended Credit Agreement, it would result in an event of default under the Amended Credit Agreement, which could result in some or all of our then-outstanding indebtedness becoming immediately due and payable.
At December 31, 2025, we had $11.3 million in outstanding letters of credit and no outstanding borrowings under our revolving credit facility.
Operating Activities
Our cash flow from operations is not only influenced by cyclicality, demand for our services, operating margins and the type of services we provide, but can also be influenced by working capital needs such as the timing of our receivable collections. Working capital needs are generally lower during our fiscal first and second quarters due to the seasonality that we experience in many regions
of the country; however, a seasonal decline in working capital may be offset by needs associated with higher growth or acquisitions. Currently, our working capital needs are higher than they have been historically, as a result of growth of our business and elevated commodity prices.
Net cash provided by operating activities was $27.7 million during the three months ended December 31, 2025, as compared to $37.3 million in the three months ended December 31, 2024. The decrease in operating cash flow resulted from an increase in cash used for working capital during the three months ended December 31, 2025 as compared with the three months ended December 31, 2024, partly offset by increased earnings in the three months ended December 31, 2025.
Investing Activities
Net cash used in investing activities was $46.2 million for the three months ended December 31, 2025, compared to $58.4 million used in investing activities in the three months ended December 31, 2024. During the three months ended December 31, 2025, we used $46.6 million for capital expenditures in support of the growth of our business. During the three months ended December 31, 2024, we paid $44.9 million to acquire a membership interest in Jett Texas Company LLC ("Jett"), an investment company, as part of the financing of Jett's investment in the CB&I storage solutions business. We also made capital expenditures of $13.2 million as we continued to purchase new assets instead of entering into new lease agreements at our Communications segment and made other capital expenditures to support the growth of our business.
Financing Activities
Net cash used in financing activities for the three months ended December 31, 2025 was $19.8 million, compared to $20.6 million for the three months ended December 31, 2024. Net cash used in financing activities for the three months ended December 31, 2025 included $17.7 million used to repurchase our common stock to satisfy statutory withholding requirements upon the vesting of employee stock compensation. Net cash used in financing activities for the three months ended December 31, 2024 included $15.7 million used to repurchase our common stock, including repurchases to satisfy statutory withholding requirements upon the vesting of employee stock compensation, and $4.0 million in distributions to noncontrolling interests under operating agreements in connection with certain acquisitions.
Stock Repurchase Program
On July 31, 2024, our Board authorized a stock repurchase program for the purchase from time to time of up to $200.0 million of the Company's common stock after the previous stock repurchase program was fully utilized. Share purchases are made for cash in open market transactions at prevailing market prices or in privately negotiated transactions or otherwise. The timing and amount of purchases under the program are determined based upon prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. All or part of the repurchases may be implemented under a Rule 10b5-1 trading plan, which allows repurchases under pre-set terms at times when the Company might otherwise be prevented from purchasing under insider trading laws or because of self-imposed blackout periods. The program does not require the Company to purchase any specific number of shares and may be modified, suspended, reinstated, or terminated at any time at the Company's discretion and without notice. We made no repurchases of common stock in open market transactions during the three months ended December 31, 2025.
MATERIAL CASH REQUIREMENTS
From time to time, we may enter into firm purchase commitments for materials, such as copper or aluminum wire, which we expect to use in the ordinary course of business. These commitments are typically for terms of less than one year and require us to buy minimum quantities of materials at specific intervals at a fixed price over the term. As of December 31, 2025, we had firm commitments of $17.0 million outstanding under agreements to purchase materials in the next 12 months in the ordinary course of business. In January 2026, we funded our purchase of Gulf Island with a combination of borrowings on our revolving line of credit and cash on hand. There have been no other material changes in our material cash requirements from those disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2025. We expect that cash and cash equivalents, cash flow from operations and availability under our revolving credit facility will be sufficient to satisfy cash requirements during at least the next 12 months.
IES Holdings Inc. published this content on January 30, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on January 30, 2026 at 12:50 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]