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Energy Services of America (ESOA) - 2025 Q2 - Quarterly Report

Part I Financial Statements (Unaudited) The company reported a $5.9 million net loss for the six months ended March 31, 2025, a significant downturn from prior-year net income, driven by decreased gross profit despite a 9.9% revenue increase, with total assets growing to $170.2 million due to an acquisition Consolidated Balance Sheets Total assets increased to $170.2 million as of March 31, 2025, primarily due to the Tribute acquisition, while total liabilities rose to $116.4 million and shareholders' equity decreased to $53.8 million Consolidated Balance Sheet Highlights (Unaudited) | Balance Sheet Item | March 31, 2025 | September 30, 2024 | | :--- | :--- | :--- | | Total Assets | $170,225,716 | $158,247,000 | | Total Current Assets | $104,204,211 | $110,426,929 | | Total Fixed Assets, net | $52,321,577 | $38,135,714 | | Goodwill | $7,428,761 | $4,087,554 | | Total Liabilities | $116,446,167 | $99,552,856 | | Total Current Liabilities | $79,800,395 | $74,248,552 | | Long-term debt, less current maturities | $30,614,888 | $17,187,992 | | Total Shareholders' Equity | $53,779,549 | $58,694,144 | Consolidated Statements of Income Revenues increased 9.9% to $177.3 million for the six months ended March 31, 2025, but a faster rise in cost of revenues led to a 39.4% decrease in gross profit to $10.3 million and a net loss of $5.7 million Income Statement Summary (Unaudited) | Metric | Six Months Ended Mar 31, 2025 | Six Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Revenue | $177,325,265 | $161,290,842 | | Gross Profit | $10,341,442 | $17,078,515 | | (Loss) Income from Operations | $(6,446,266) | $2,557,844 | | Net (Loss) Income | $(5,944,685) | $933,367 | | Diluted (Loss) Earnings Per Share | $(0.36) | $0.06 | Consolidated Statements of Cash Flows Net cash provided by operating activities significantly improved to $10.0 million for the six months ended March 31, 2025, while investing activities used $25.3 million primarily for the Tribute acquisition, resulting in a $3.0 million decrease in cash and cash equivalents Cash Flow Summary (Unaudited, Six Months Ended March 31) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $9,989,308 | $183,114 | | Net cash used in investing activities | $(25,274,011) | $(2,642,168) | | Net cash provided by (used in) financing activities | $12,284,900 | $(1,881,052) | | Decrease in cash and cash equivalents | $(2,999,803) | $(4,340,106) | Consolidated Statements of Changes in Shareholders' Equity Shareholders' equity decreased by $4.9 million to $53.8 million as of March 31, 2025, primarily due to the net loss and dividend payments, partially offset by stock issued for the Tribute acquisition - Shareholders' equity decreased by $4.9 million over the six-month period to $53,779,54915 - The decrease was driven by a net loss for the period and dividends on common stock, partially offset by $2.0 million in common stock issued for an acquisition15 Notes to Unaudited Consolidated Financial Statements The notes detail the Tribute acquisition, the reinstatement of $9.8 million in previously forgiven PPP loans as a liability, revenue recognition policies, a $223.2 million backlog, increased debt for the acquisition, and compliance with debt covenants - The company completed the acquisition of Tribute Contracting & Consultants, LLC on December 2, 2024, for $22.0 million in cash and $2.0 million in stock74 - The company has recorded a short-term borrowing of $9.8 million plus accrued interest for previously forgiven PPP loans that are now under review by the SBA3268 - At March 31, 2025, the company had $223.2 million in remaining unsatisfied performance obligations expected to be recognized as revenue over the next twelve months45 - Goodwill increased by $3.3 million to $7.4 million due to the Tribute acquisition80 Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes 9.9% revenue growth to increased Gas & Water Distribution services, offset by declines in Gas & Petroleum Transmission, while gross profit fell by $6.7 million due to productivity issues and reduced margins, with the Tribute acquisition impacting financial condition and increasing backlog to $280.7 million Results of Operations Revenues increased 9.9% to $177.3 million for the six months ended March 31, 2025, but a faster rise in cost of revenues led to a 39.4% decrease in gross profit to $10.3 million and a net loss of $5.7 million Revenue by Segment (Six Months Ended March 31) | Segment | 2025 Revenue | 2024 Revenue | % Change | | :--- | :--- | :--- | :--- | | Gas & Water Distribution | $58,401,124 | $31,356,586 | 86.2% | | Gas & Petroleum Transmission | $21,851,275 | $38,326,321 | -43.0% | | Electrical, Mechanical, & General | $97,072,866 | $91,607,935 | 6.0% | | Total | $177,325,265 | $161,290,842 | 9.9% | Gross Profit (Loss) by Segment (Six Months Ended March 31) | Segment | 2025 Gross Profit | 2024 Gross Profit | % Change | | :--- | :--- | :--- | :--- | | Gas & Water Distribution | $4,252,404 | $6,387,439 | -33.4% | | Gas & Petroleum Transmission | $(271,277) | $3,627,153 | -107.5% | | Electrical, Mechanical, & General | $8,593,292 | $8,177,317 | 5.1% | | Total (after unallocated expenses) | $10,341,442 | $17,078,515 | -39.4% | - Gross profit decreases in Gas & Water Distribution and Gas & Petroleum Transmission were primarily attributed to lower productivity from inclement weather and project timing issues126127 - Selling and administrative expenses increased by $2.3 million, partly due to the Tribute acquisition ($553,000) and increased consulting/audit fees from becoming an accelerated filer132 Comparison of Financial Condition Total assets grew by $12.0 million to $170.2 million due to the Tribute acquisition, while total liabilities increased by $16.9 million to $116.4 million and shareholders' equity decreased by $4.9 million - Net property, plant and equipment increased by $14.2 million to $52.3 million, largely due to $14.9 million in assets from the Tribute acquisition140 - Total debt (current and long-term) increased by $16.8 million to $40.4 million, primarily due to $16.0 million in financing for the Tribute acquisition and the assumption of $3.8 million of its debt151 - Shareholders' equity decreased by $4.9 million to $53.8 million, reflecting a net loss of $5.9 million and dividends, partially offset by $2.0 million in stock issued for the acquisition158 Liquidity and Capital Resources The company maintains a $30.0 million line of credit with $12.5 million available, was in compliance with all debt covenants, and faces a significant contingency regarding the potential repayment of $9.8 million in PPP loans under SBA review - The company has a $30.0 million line of credit, with $5.75 million drawn and $12.5 million available as of March 31, 2025160 - The company was in compliance with all debt covenants at March 31, 2025, after the lender agreed to exclude the impact of the PPP loan restatement from calculations161 - A major uncertainty is the potential repayment of $9.8 million in PPP loans, which were previously forgiven but are now under SBA review164165166 Outlook The company's outlook is supported by a strong backlog, which increased to $280.7 million at March 31, 2025, with significant bid opportunities in water, wastewater, electrical, and mechanical projects, and expected increases in natural gas project opportunities - The unaudited backlog increased to $280.7 million at March 31, 2025, compared to $243.2 million at September 30, 2024235 - The company is seeing significant bid opportunities in water, wastewater, electrical, and mechanical projects, with natural gas project opportunities delayed but expected to increase234 Quantitative and Qualitative Disclosures About Market Risk Disclosure is not required for this section as the company is classified as a smaller reporting company - Disclosure is not required for a smaller reporting company236 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal controls, and the newly acquired Tribute subsidiary is within its one-year SOX compliance grace period - The CEO and CFO concluded that disclosure controls and procedures were effective as of the end of the reporting period238 - There were no material changes to internal controls over financial reporting during the second quarter of fiscal year 2025239 - The recently acquired Tribute subsidiary has a one-year grace period before needing to fully comply with Sarbanes-Oxley (SOX) regulations240 Part II Legal Proceedings The company is negotiating a disputed pension plan withdrawal liability claim, believing it is exempt and expecting no future liabilities, while other legal proceedings are considered ordinary course of business - The company is negotiating a withdrawal liability claim from a pension plan for which it received a demand for quarterly payments of $41,000 starting in December 2021243 - The company disputes the claim and believes no withdrawal liability exists, with payments suspended during negotiations and no future liabilities expected243 Risk Factors No material changes to risk factors have occurred since the filing of the Annual Report on Form 10-K on December 19, 2024 - No material changes to risk factors have occurred since the filing of the Annual Report on Form 10-K on December 19, 2024245 Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities and no common stock repurchases during the three months ended March 31, 2025 - There were no unregistered sales of equity securities during the reporting period247 - The company did not repurchase any shares of its common stock during the three months ended March 31, 2025247 Other Information No directors or officers adopted or terminated Rule 10b5-1 trading plans during the second fiscal quarter of 2025 - No directors or officers adopted or terminated Rule 10b5-1 trading plans during the second fiscal quarter of 2025246 Exhibits Exhibits filed with the Form 10-Q include CEO and CFO certifications and XBRL data files - Exhibits filed include certifications from the CEO and CFO and XBRL Interactive Data Files248