IES Holdings(IESC) - 2025 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents IES Holdings' comprehensive financial information, including financial statements, notes, and management's discussion Definitions This section defines key terms used throughout the Quarterly Report on Form 10-Q, clarifying company references - The terms "IES", "the Company", "the Registrant", "we", "our", "ours" and "us" refer to IES Holdings, Inc. and its consolidated subsidiaries[12] Disclosure Regarding Forward-Looking Statements This section outlines forward-looking statements, emphasizing their reliance on estimates and assumptions, and lists associated risks - Forward-looking statements are based on estimates and assumptions, subject to risks and uncertainties that could cause actual results to differ materially[14][16] - Key risks include reduced demand, economic conditions (supply chain, inflation, interest rates), competition, project execution, and acquisition integration[14] - Additional risks cover litigation, regulatory changes, cybersecurity threats, loss of key personnel, credit markets, tax impacts, and controlling shareholder influence[17] Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for IES Holdings, Inc. and its subsidiaries, including the balance sheets, statements of comprehensive income, statements of stockholders' equity, and statements of cash flows, along with detailed notes explaining business operations, accounting policies, and specific financial items Condensed Consolidated Balance Sheets The balance sheets show IES Holdings' financial position, with significant increases in total assets, current assets, and total stockholders' equity | Metric | June 30, 2025 (Thousands) | September 30, 2024 (Thousands) | Change (Thousands) | % Change | | :----------------------------------- | :-------------------------- | :----------------------------- | :----------------- | :------- | | Total Assets | $1,469,722 | $1,244,026 | $225,696 | 18.14% | | Total Current Assets | $1,012,854 | $871,694 | $141,160 | 16.19% | | Cash and cash equivalents | $101,445 | $100,832 | $613 | 0.61% | | Marketable securities | $66,815 | $35,003 | $31,812 | 90.88% | | Accounts receivable, net | $535,541 | $469,833 | $65,708 | 14.00% | | Total Liabilities | $647,304 | $591,917 | $55,387 | 9.36% | | Total Stockholders' Equity | $781,441 | $611,113 | $170,328 | 27.87% | Condensed Consolidated Statements of Comprehensive Income The statements show strong revenue and net income growth for both periods ended June 30, 2025, driven by increased gross and operating income Three Months Ended June 30, 2025 vs 2024 | Metric (Thousands) | 2025 | 2024 | Change | % Change | | :----------------- | :---------- | :---------- | :---------- | :------- | | Revenues | $890,158 | $768,415 | $121,743 | 15.84% | | Gross profit | $239,597 | $194,781 | $44,816 | 23.01% | | Operating income | $111,902 | $90,176 | $21,726 | 24.09% | | Net income | $79,287 | $66,639 | $12,648 | 18.98% | | Basic EPS | $3.86 | $2.71 | $1.15 | 42.44% | | Diluted EPS | $3.81 | $2.67 | $1.14 | 42.69% | Nine Months Ended June 30, 2025 vs 2024 | Metric (Thousands) | 2025 | 2024 | Change | % Change | | :----------------- | :------------ | :------------ | :------------ | :------- | | Revenues | $2,473,665 | $2,108,592 | $365,073 | 17.31% | | Gross profit | $626,493 | $510,198 | $116,295 | 22.80% | | Operating income | $279,216 | $225,880 | $53,336 | 23.61% | | Net income | $209,560 | $167,027 | $42,533 | 25.46% | | Basic EPS | $10.16 | $6.92 | $3.24 | 46.82% | | Diluted EPS | $10.03 | $6.84 | $3.19 | 46.64% | Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity increased for both periods ended June 30, 2025, primarily due to net income, partially offset by treasury stock acquisitions Stockholders' Equity Changes (Thousands) | Metric | 3 Months Ended June 30, 2025 | 9 Months Ended June 30, 2025 | | :-------------------------------------- | :--------------------------- | :--------------------------- | | Balance, beginning of period | $705,783 | $611,113 | | Net income attributable to IES Holdings | $77,230 | $204,185 | | Acquisition of treasury stock | $(5,328) | $(41,593) | | Non-cash compensation | $4,316 | $9,354 | | Balance, end of period | $781,441 | $781,441 | Condensed Consolidated Statements of Cash Flows Net cash from operating activities increased for the nine months ended June 30, 2025, with changes in investing and financing activities Cash Flow Summary (Nine Months Ended June 30, Thousands) | Activity | 2025 | 2024 | Change | | :---------------------------- | :------------ | :------------ | :------------ | | Net cash from operating | $154,095 | $141,621 | $12,474 | | Net cash used in investing | $(114,099) | $(96,397) | $(17,702) | | Net cash used in financing | $(32,380) | $(76,097) | $43,717 | | Increase (decrease) in cash | $7,616 | $(30,873) | $38,489 | | Cash, beginning of period | $100,832 | $75,770 | $25,062 | | Cash, end of period | $108,448 | $44,897 | $63,551 | - Investing activities for the nine months ended June 30, 2025, included $44.9 million for equity investments (Jett Texas Company LLC), $47.3 million for property and equipment, and $22.6 million for business combinations (Arrow Engine Company)[30] - Financing activities for the nine months ended June 30, 2025, included $41.6 million for treasury stock repurchases and $7.5 million in distributions to noncontrolling interests[30] Notes to Condensed Consolidated Financial Statements These notes explain the company's business, accounting policies, and specific financial items, including revenue, debt, and segment reporting 1. Business and Accounting Policies This section describes IES Holdings' business segments and details its accounting policies, including seasonality and recent standard adoptions - IES Holdings, Inc. operates in four segments: Communications (technology infrastructure for data centers), Residential (electrical, HVAC, plumbing for housing), Infrastructure Solutions (electro-mechanical solutions for industrial operations), and Commercial & Industrial (electrical and mechanical services)[32][36] - The Residential segment experiences seasonality with higher revenues in spring/summer, while other segments are less seasonal but can be affected by project timing and economic conditions[33] - The company adopted ASU 2021-08 (Business Combinations) on October 1, 2023, impacting how acquired contract assets and liabilities are recognized; new standards are being evaluated for future disclosure impacts[44][45][46][47] 2. Controlling Stockholder Tontine Associates, L.L.C. is the controlling stockholder, owning approximately 55% of common stock, granting significant control over company affairs - Tontine Associates, L.L.C. and its affiliates (Tontine) own approximately 55% of IES Holdings, Inc.'s outstanding common stock, giving them significant control[48] - A shelf registration statement allows Tontine to resell its shares, and a significant disposition could trigger change of control provisions in credit agreements, bonding agreements, and executive severance plans[49][50] - Jeffrey L. Gendell, managing member and founder of Tontine, transitioned from CEO to Executive Chairman effective July 1, 2025, and also serves as Chairman of the Board[51] 3. Revenue Recognition IES Holdings recognizes revenue primarily over time using the percentage of completion method, with variable consideration estimated and disaggregated by segment - Revenue is primarily recognized over time using the percentage of completion method, based on costs incurred, for most services where control transfers continuously to the customer[59][60] - Variable consideration, including change orders and incentives, is estimated and included in the transaction price if a significant revenue reversal is not probable[61] Disaggregated Revenue by Segment (Thousands) | Segment | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 9 Months Ended June 30, 2025 | 9 Months Ended June 30, 2024 | | :---------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Communications | $299,213 | $192,303 | $805,189 | $556,554 | | Residential | $346,038 | $377,536 | $983,975 | $1,032,764 | | Infrastructure Solutions| $129,488 | $102,022 | $355,233 | $240,699 | | Commercial & Industrial | $115,419 | $96,554 | $329,268 | $278,575 | | Total Revenue | $890,158 | $768,415 | $2,473,665 | $2,108,592 | 4. Debt IES Holdings amended its credit agreement, increasing its revolving credit facility to $300 million and extending maturity to January 21, 2030 - The revolving credit facility increased from $150 million to $300 million, with maturity extended to January 21, 2030[69] - As of June 30, 2025, the company had $20 million in borrowings and $5.5 million in outstanding letters of credit, resulting in $274.5 million total availability under the revolving credit facility[71] - The company was in compliance with financial covenants, including a maximum Consolidated Total Leverage Ratio of 3.00 to 1.00 and a minimum Consolidated Interest Coverage Ratio of 3.00 to 1.00[70] 5. Per Share Information This section reconciles basic and diluted EPS, showing significant increases for both the three and nine months ended June 30, 2025 Earnings Per Share (EPS) Attributable to Common Stockholders | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 9 Months Ended June 30, 2025 | 9 Months Ended June 30, 2024 | | :----- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Basic | $3.86 | $2.71 | $10.16 | $6.92 | | Diluted| $3.81 | $2.67 | $10.03 | $6.84 | - Basic EPS increased by 42.44% for the three months and 46.82% for the nine months ended June 30, 2025, compared to the prior year[74] - Diluted EPS increased by 42.69% for the three months and 46.64% for the nine months ended June 30, 2025, compared to the prior year[74] 6. Operating Segments IES Holdings manages its business through four operating segments, with detailed financial results provided for each segment - The company's four operating segments are Communications, Residential, Infrastructure Solutions, and Commercial & Industrial, with performance reviewed by the CEO[75] Segment Revenues (Thousands) | Segment | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 9 Months Ended June 30, 2025 | 9 Months Ended June 30, 2024 | | :---------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Communications | $299,213 | $192,303 | $805,189 | $556,554 | | Residential | $346,038 | $377,536 | $983,975 | $1,032,764 | | Infrastructure Solutions| $129,488 | $102,022 | $355,233 | $240,699 | | Commercial & Industrial | $115,419 | $96,554 | $329,268 | $278,575 | | Total Revenues | $890,158 | $768,415 | $2,473,665 | $2,108,592 | Segment Operating Income (Loss) (Thousands) | Segment | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 9 Months Ended June 30, 2025 | 9 Months Ended June 30, 2024 | | :---------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Communications | $47,722 | $21,004 | $115,956 | $64,345 | | Residential | $33,376 | $43,720 | $79,876 | $102,507 | | Infrastructure Solutions| $32,672 | $19,730 | $82,442 | $46,754 | | Commercial & Industrial | $12,949 | $13,029 | $35,857 | $31,698 | | Corporate | $(14,817) | $(7,307) | $(34,915) | $(19,424) | | Total Operating Income | $111,902 | $90,176 | $279,216 | $225,880 | 7. Stockholders' Equity This section details changes in stockholders' equity, including the Equity Incentive Plan amendment and the ongoing stock repurchase program - The Equity Incentive Plan was amended to authorize an additional 750,000 shares, extending its term to February 19, 2035, with approximately 1.27 million shares available for issuance as of June 30, 2025[79] - A stock repurchase program authorized up to $200 million of common stock purchases, with 173,262 shares repurchased for $41.6 million during the nine months ended June 30, 2025, at an average price of $174.25 per share[80][177] Stock-Based Compensation Expense (Thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 9 Months Ended June 30, 2025 | 9 Months Ended June 30, 2024 | | :------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Director PSUs | $173 | $134 | $492 | $364 | | Employee PSUs | $4,157 | $1,274 | $8,924 | $3,969 | 8. Investments This section details the company's investments in marketable equity securities and an equity method investment in Jett Texas Company LLC Marketable Securities (Thousands) | Type of Security | June 30, 2025 | September 30, 2024 | | :----------------------- | :------------ | :----------------- | | Marketable equity securities | $66,815 | $31,639 | | Marketable debt securities | — | $3,364 | | Total marketable securities| $66,815 | $35,003 | Unrealized Gain (Loss) on Trading Securities (Thousands) | Period | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 9 Months Ended June 30, 2025 | 9 Months Ended June 30, 2024 | | :---------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Unrealized gain (loss) | $(3,764) | $(1,552) | $4,098 | $(3,342) | - On December 2, 2024, the company acquired a 12.5% membership interest in Jett Texas Company LLC for $44.9 million, accounted for using the equity method[87] 9. Fair Value Measurements This section outlines fair value measurement accounting for marketable securities, executive savings plan assets, and contingent consideration liabilities - Fair value is the price to sell an asset or transfer a liability between market participants, with a hierarchy for observable and unobservable inputs[88] - Marketable equity securities and executive savings plan assets/liabilities are measured at fair value using Level 1 inputs (quoted prices in active markets)[91] - Contingent consideration liabilities, such as for the Greiner Industries acquisition, are measured using Level 3 inputs (significant unobservable inputs), with a fair value of $(4,484) thousand at June 30, 2025[91][93] 10. Inventory This section details inventory components, which increased from $101.7 million at September 30, 2024, to $108.8 million at June 30, 2025 Inventory Components (Thousands) | Component | June 30, 2025 | September 30, 2024 | | :-------------- | :------------ | :----------------- | | Raw materials | $26,446 | $14,078 | | Work in process | $13,016 | $12,494 | | Finished goods | $6,893 | $4,389 | | Parts and supplies| $62,420 | $70,767 | | Total inventories | $108,775 | $101,728 | - Total inventories increased by $7.0 million, or 6.9%, from September 30, 2024, to June 30, 2025[94] 11. Goodwill and Intangible Assets Goodwill increased by $1.3 million to $95.3 million due to the Arrow Engine Company acquisition, while net intangible assets decreased Goodwill by Segment (Thousands) | Segment | Goodwill at Sept 30, 2024 | Acquisitions | Goodwill at June 30, 2025 | | :---------------------- | :------------------------ | :----------- | :------------------------ | | Communications | $2,816 | — | $2,816 | | Residential | $51,370 | — | $51,370 | | Infrastructure Solutions| $39,774 | $1,335 | $41,109 | | Commercial & Industrial | — | — | — | | Total Goodwill | $93,960 | $1,335 | $95,295 | - Goodwill increased by $1.3 million, primarily from the acquisition of Arrow Engine Company on January 31, 2025[95] Intangible Assets, Net (Thousands) | Intangible Asset | June 30, 2025 | September 30, 2024 | | :------------------------ | :------------ | :----------------- | | Trademarks/trade names | $7,000 | $6,857 | | Technical library | $164 | $179 | | Customer relationships | $31,499 | $38,318 | | Backlog and construction contracts | $214 | $536 | | Total intangible assets, net | $38,877 | $45,890 | 12. Commitments and Contingencies This section addresses legal matters, risk management, and surety obligations, with no material adverse effects expected from current proceedings - The company is party to various claims and lawsuits in the ordinary course of business, with reserves recorded when a liability is probable and estimable, expecting no material adverse effect on financial position, results of operations, or cash flows[97] - IES retains risk for workers' compensation, liability, and health claims, with $11.4 million accrued for self-insurance liabilities at June 30, 2025[99] - The estimated cost to complete bonded projects was approximately $142.2 million as of June 30, 2025, and the company believes its bonding capacity is adequate[101] 13. Supplemental Cash Flow Information This section reconciles cash, cash equivalents, and restricted cash, and details supplemental cash and noncash activities, including right-of-use assets Cash, Cash Equivalents and Restricted Cash (Thousands) | Component | June 30, 2025 | September 30, 2024 | | :-------------------------------------- | :------------ | :----------------- | | Cash and cash equivalents | $101,445 | $100,832 | | Restricted cash | $7,003 | — | | Total cash, cash equivalents and restricted cash | $108,448 | $100,832 | Supplemental Cash and Noncash Activities (Nine Months Ended June 30, Thousands) | Activity | 2025 | 2024 | | :---------------------------------------------- | :-------- | :-------- | | Cash paid for interest | $564 | $405 | | Cash paid for income taxes, net | $94,078 | $57,790 | | Right-of-use assets for new operating lease liabilities | $35,328 | $12,691 | | Right-of-use assets for new finance lease liabilities | $663 | $1,268 | 14. Subsequent Events This section reports the acquisition of the remaining 20% noncontrolling interest in Edmonson Electric on July 1, 2025, for $40 million - On July 1, 2025, IES Holdings acquired the remaining 20% noncontrolling interest in Edmonson Electric for $40 million[107] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition, results of operations, market conditions, and liquidity Overview The overview highlights IES Holdings' business in integrated electrical and technology systems, noting strong demand in data centers and challenges in residential - IES Holdings designs and installs integrated electrical and technology systems and provides infrastructure products and services to data centers, residential housing, and commercial and industrial facilities[111] - Strong demand continues in key end markets, especially data centers, benefiting Communications, Infrastructure Solutions, and Commercial & Industrial segments[112] - The Residential segment faces challenges from housing affordability, elevated mortgage rates, and economic uncertainty, impacting single-family revenues and gross margins, and leading to reduced multi-family backlog[112] Results of Operations This section details consolidated and segment-specific financial performance, showing significant revenue and gross profit increases, except for Residential Consolidated Financial Highlights (Three Months Ended June 30, Thousands) | Metric | 2025 | 2024 | Change | % Change | | :------------------------- | :---------- | :---------- | :---------- | :------- | | Revenues | $890,158 | $768,415 | $121,743 | 15.8% | | Gross profit | $239,597 | $194,781 | $44,816 | 23.0% | | Gross profit percentage | 26.9% | 25.3% | 1.6 pp | | | SG&A expenses | $127,334 | $104,694 | $22,640 | 21.6% | | SG&A as % of revenue | 14.3% | 13.6% | 0.7 pp | | | Operating income | $111,902 | $90,176 | $21,726 | 24.1% | Consolidated Financial Highlights (Nine Months Ended June 30, Thousands) | Metric | 2025 | 2024 | Change | % Change | | :------------------------- | :------------ | :------------ | :------------ | :------- | | Revenues | $2,473,665 | $2,108,592 | $365,073 | 17.3% | | Gross profit | $626,493 | $510,198 | $116,295 | 22.8% | | Gross profit percentage | 25.3% | 24.2% | 1.1 pp | | | SG&A expenses | $346,417 | $285,816 | $60,601 | 21.2% | | SG&A as % of revenue | 14.0% | 13.6% | 0.4 pp | | | Operating income | $279,216 | $225,880 | $53,336 | 23.6% | Communications Segment The Communications segment experienced substantial growth in revenues and gross profit, driven by strong demand in the data center market Communications Segment Performance (Thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 9 Months Ended June 30, 2025 | 9 Months Ended June 30, 2024 | | :--------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Revenues | $299,213 (55.6% YoY) | $192,303 | $805,189 (44.7% YoY) | $556,554 | | Gross Profit | $73,124 (97.0% YoY) | $37,119 | $184,978 (64.7% YoY) | $112,329 | | Gross Margin | 24.4% | 19.3% | 23.0% | 20.2% | | Operating Income | $47,722 (127.2% YoY) | $21,004 | $115,956 (80.2% YoY) | $64,345 | - Revenue growth was primarily due to increased demand in the data center market[123][126] - Gross profit and margin improvements reflect strong demand and successful project execution[124][127] Residential Segment The Residential segment saw decreased revenues due to housing market challenges and reduced multi-family backlog, despite slight gross margin improvement Residential Segment Performance (Thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 9 Months Ended June 30, 2025 | 9 Months Ended June 30, 2024 | | :--------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Revenues | $346,038 (-8.3% YoY) | $377,536 | $983,975 (-4.7% YoY) | $1,032,764 | | Gross Profit | $97,312 (-7.6% YoY) | $105,312 | $256,112 (-4.9% YoY) | $269,413 | | Gross Margin | 28.1% | 27.9% | 26.0% | 26.1% | | Operating Income | $33,376 (-23.7% YoY) | $43,720 | $79,876 (-22.1% YoY) | $102,507 | - Revenue decline was driven by decreased single-family electrical and plumbing/HVAC revenues due to housing affordability concerns and reduced multi-family backlog from elevated interest rates[129][132] - Gross margin for the three months ended June 30, 2025, improved slightly due to reduced material costs and better project execution in multi-family, offsetting lower volume[130] Infrastructure Solutions Segment This segment achieved significant revenue and gross profit increases, fueled by strong demand in custom engineered solutions and recent acquisitions Infrastructure Solutions Segment Performance (Thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 9 Months Ended June 30, 2025 | 9 Months Ended June 30, 2024 | | :--------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Revenues | $129,488 (26.9% YoY) | $102,022 | $355,233 (47.6% YoY) | $240,699 | | Gross Profit | $46,159 (50.6% YoY) | $30,656 | $120,432 (65.9% YoY) | $72,592 | | Gross Margin | 35.6% | 30.0% | 33.9% | 30.2% | | Operating Income | $32,672 (65.6% YoY) | $19,730 | $82,442 (76.3% YoY) | $46,754 | - Revenue growth was primarily driven by strong demand in custom engineered solutions (e.g., generator enclosures for data centers) and expansion of field services[135][138] - Acquisitions, including Arrow Engine Company (contributing $5.3 million in Q3 2025) and Greiner Industries, Inc., significantly contributed to revenue growth[135][138] Commercial & Industrial Segment This segment reported increased revenues driven by strong demand in education, healthcare, and data centers, despite a slight decrease in gross margin Commercial & Industrial Segment Performance (Thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 9 Months Ended June 30, 2025 | 9 Months Ended June 30, 2024 | | :--------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Revenues | $115,419 (19.5% YoY) | $96,554 | $329,268 (18.2% YoY) | $278,575 | | Gross Profit | $23,002 (6.0% YoY) | $21,694 | $64,971 (16.3% YoY) | $55,864 | | Gross Margin | 19.9% | 22.5% | 19.7% | 20.1% | | Operating Income | $12,949 (-0.6% YoY) | $13,029 | $35,857 (13.1% YoY) | $31,698 | - Revenue growth was primarily driven by increased activity in education and healthcare, strong demand and execution in the data center market, and expansion in the Midwest[141][145] - Gross profit percentage decreased for both periods compared to the prior year, which benefited from a large data center project with favorable margins[142][146] Interest and Other Expense, Net Total interest and other expense, net, increased for the three months due to unrealized losses, but was income for nine months due to unrealized gains Interest and Other Expense, Net (Thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 9 Months Ended June 30, 2025 | 9 Months Ended June 30, 2024 | | :-------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total interest expense | $534 | $395 | $1,318 | $1,198 | | Interest income | $(435) | $(1,044) | $(2,055) | $(3,311) | | Other expense (income), net | $2,617 | $570 | $(7,199) | $313 | | Total interest and other expense (income), net | $3,151 | $965 | $(5,881) | $1,511 | - The increase in total other expense, net, for the three months ended June 30, 2025, was primarily due to $3.8 million in unrealized losses on trading securities, compared to $1.6 million in losses in the prior year[150] - For the nine months ended June 30, 2025, total other (income) expense, net, shifted to an income of $(5.9) million, driven by $4.1 million in unrealized gains on trading securities, compared to $3.3 million in losses in the prior year, partially offset by decreased interest income[152] Provision for Income Taxes The provision for income taxes increased for both the three and nine months ended June 30, 2025, primarily due to higher pretax income Income Tax Expense (Thousands) | Period | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 9 Months Ended June 30, 2025 | 9 Months Ended June 30, 2024 | | :----- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Expense| $29,464 | $22,572 | $75,537 | $57,342 | - Income tax expense increased by $6.9 million (30.5%) for the three months and $18.2 million (31.7%) for the nine months ended June 30, 2025, primarily due to increased pretax income[154] Critical Accounting Policies and Estimates This section confirms financial statements are prepared using GAAP, requiring estimates in revenue recognition, business combinations, and income taxes - Preparation of financial statements requires estimates and assumptions, primarily in revenue recognition of construction in progress, fair value assumptions in business combinations, stock-based compensation, legal reserves, and deferred tax assets[156] - No significant changes to accounting policies have occurred since the Annual Report on Form 10-K for the fiscal year ended September 30, 2024[157] Remaining Performance Obligations and Backlog Remaining performance obligations were $1.3 billion as of June 30, 2025, with total backlog reaching $2.1 billion Remaining Performance Obligations and Backlog (Thousands) | Metric | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | | :------------------------------ | :------------ | :------------- | :---------------- | :----------------- | | Remaining performance obligations | $1,295,207 | $1,225,985 | $1,214,828 | $1,175,695 | | Agreements without enforceable obligation | $771,593 | $586,724 | $539,164 | $610,459 | | Total Backlog | $2,066,800 | $1,812,709 | $1,753,992 | $1,786,154 | - The company expects to recognize approximately $940.2 million of its remaining performance obligations over the next 12 months[66] - Backlog includes signed agreements and letters of intent that are not legally enforceable until work begins[159] Working Capital Working capital (excluding cash) increased by $109.6 million during the nine months ended June 30, 2025, driven by current asset growth - Working capital (excluding cash) increased by $109.6 million from September 30, 2024, to June 30, 2025[161] - Current assets (excluding cash) increased by $133.6 million, driven by a $74.4 million rise in accounts receivable and a $31.8 million increase in marketable securities[162] - Current liabilities increased by $24.0 million, primarily due to a $28.2 million increase in accounts payable and accrued expenses[164] Surety The company maintains adequate bonding capacity, with an estimated cost to complete bonded projects of approximately $142.2 million as of June 30, 2025 - The estimated cost to complete bonded projects was approximately $142.2 million as of June 30, 2025[165] - The company believes its current bonding capacity is adequate for present and future operations[165] Liquidity and Capital Resources This section discusses the company's liquidity, including its expanded revolving credit facility, cash flow, and stock repurchase program - The Fourth Amended and Restated Credit Agreement increased the revolving credit facility to $300 million and extended maturity to January 21, 2030[167] - Net cash provided by operating activities increased to $154.1 million for the nine months ended June 30, 2025, driven by increased earnings[174] - Net cash used in investing activities was $114.1 million, including $44.9 million for an equity investment in Jett Texas Company LLC and $22.6 million for business combinations[175] - Net cash used in financing activities was $32.4 million, including $41.6 million for common stock repurchases[176] The Revolving Credit Facility The revolving credit facility was increased to $300 million with a maturity date of January 21, 2030, and the company was in compliance with covenants - The maximum revolver amount increased to $300 million, and the maturity date was extended to January 21, 2030[167] - Financial covenants include a maximum Consolidated Total Leverage Ratio of 3.00 to 1.00 and a minimum Consolidated Interest Coverage Ratio of 3.00 to 1.00, with which the company was in compliance[168] - As of June 30, 2025, the company had $20 million in borrowings and $5.5 million in outstanding letters of credit, leaving $274.5 million in total availability[172] Operating Activities Net cash provided by operating activities increased to $154.1 million for the nine months ended June 30, 2025, driven by higher earnings Net Cash Provided by Operating Activities (Thousands) | Period | 9 Months Ended June 30, 2025 | 9 Months Ended June 30, 2024 | | :----------------------------------- | :--------------------------- | :--------------------------- | | Net cash provided by operating activities | $154,095 | $141,621 | - The increase in operating cash flow resulted from increased earnings, partially offset by a $26.9 million increase in net investments in marketable securities[174] Investing Activities Net cash used in investing activities increased to $114.1 million, including equity investments, capital expenditures, and business combinations Net Cash Used in Investing Activities (Thousands) | Period | 9 Months Ended June 30, 2025 | 9 Months Ended June 30, 2024 | | :----------------------------------- | :--------------------------- | :--------------------------- | | Net cash used in investing activities | $(114,099) | $(96,397) | - Key investing activities included a $44.9 million equity investment in Jett Texas Company LLC and $22.6 million for business combinations (primarily Arrow Engine Company)[175] - Capital expenditures amounted to $47.3 million, reflecting purchases of new assets and support for business growth[175] Financing Activities Net cash used in financing activities decreased to $32.4 million, primarily due to lower distributions and the absence of a prior-year purchase Net Cash Used in Financing Activities (Thousands) | Activity | 9 Months Ended June 30, 2025 | 9 Months Ended June 30, 2024 | | :------------------------------------- | :--------------------------- | :--------------------------- | | Net cash used in financing activities | $(32,380) | $(76,097) | | Purchase of treasury stock | $(41,593) | $(24,320) | | Distribution to noncontrolling interest| $(7,536) | $(13,533) | | Purchase of noncontrolling interest | — | $(31,200) | - The decrease in cash used was largely due to the prior year's $31.2 million purchase of noncontrolling interest in Bayonet and higher distributions to noncontrolling interests in 2024[176] Stock Repurchase Program The Board authorized a new $200 million stock repurchase program, under which 173,262 shares were repurchased during the nine months ended June 30, 2025 - A new stock repurchase program for up to $200 million of common stock was authorized on July 31, 2024[177] - 173,262 shares were repurchased under the program during the nine months ended June 30, 2025[177] Material Cash Requirements Capital expenditures for fiscal year 2025 are projected at $70 million to $80 million, with sufficient liquidity expected for the next 12 months - Capital expenditure expectations for fiscal year 2025 are in the range of $70 million to $80 million, up from $45.2 million in fiscal year 2024, to expand capacity[179] - The company had no firm purchase commitments for materials (e.g., copper, aluminum wire) outstanding as of June 30, 2025[179] - Cash and cash equivalents, cash flow from operations, and revolving credit facility availability are expected to be sufficient to meet cash requirements for at least the next 12 months[180] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses exposure to market risks, including commodity price fluctuations, investment volatility, and interest rate risk on floating-rate debt - The company is exposed to commodity price risks (copper, aluminum, steel, etc.) due to the fixed-price nature of many contracts, though it expects to pass some costs to customers[182] - Investment risk arises from market price volatility of marketable securities; a 10% change in their $66.8 million fair value (as of June 30, 2025) would cause a $6.7 million change in pre-tax income[183] - Interest rate risk stems from floating-rate debt under the revolving credit facility; a one percentage point increase in interest rates would lead to a $0.2 million pre-tax annual increase in interest expense on outstanding debt as of June 30, 2025[184] Item 4. Controls and Procedures No material changes occurred in internal control over financial reporting, and disclosure controls and procedures were effective as of June 30, 2025 - No material changes occurred in the company's internal control over financial reporting during the fiscal quarter[185] - The company is implementing a new ERP system in phases, updating internal controls as appropriate[185] - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025, ensuring timely and accurate reporting[186][187] PART II. OTHER INFORMATION This section provides additional information not covered in Part I, including legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings This section refers to Note 12 of the financial statements for information regarding legal proceedings, with no new material proceedings disclosed - Information on legal proceedings is incorporated by reference from Note 12, "Commitments and Contingencies – Legal Matters," in Part I, Item 1 of this Quarterly Report[189] Item 1A. Risk Factors This section states that there have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - No material changes to the risk factors disclosed in the Annual Report on Form 10-K for the fiscal year ended September 30, 2024[190] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details stock repurchase activity, with 33,900 shares repurchased in April 2025 at an average price of $157.16 per share Stock Repurchase Activity (April 2025) | Date | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of a Publicly Announced Plan | Maximum Dollar Value of Shares That May Yet Be Purchased Under the Publicly Announced Plan | | :------------------------- | :------------------------------- | :--------------------------- | :------------------------------------------------------------------ | :------------------------------------------------------------------------- | | April 1, 2025 – April 30, 2025 | 33,900 | $157.16 | 33,900 | $167,950,925 | - The Board authorized a new stock repurchase program for up to $200 million of common stock on July 31, 2024[192] Item 3. Defaults Upon Senior Securities This section states that there were no defaults upon senior securities during the reporting period - No defaults upon senior securities were reported[193] Item 4. Mine Safety Disclosures This section indicates that there are no mine safety disclosures to report - No mine safety disclosures were reported[193] Item 5. Other Information This section reports that no directors or officers adopted, modified, or terminated Rule 10b5-1 trading arrangements during the quarter - No directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[193] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including XBRL documents and certifications from the CEO and CFO - Exhibits include XBRL Schema, Label, Presentation, Definition, and Calculation Linkbase Documents, as well as Inline XBRL Instance and Cover Page Interactive Data Files[195][196][198] - Certifications from the President and Chief Executive Officer (Matthew J. Simmes) and Senior Vice President, Chief Financial Officer and Treasurer (Tracy A. McLauchlin) are filed under Rule 13a-14(a)/15d-14(a) and Section 1350[198] SIGNATURES This section contains the required signatures for the Quarterly Report on Form 10-Q, certifying its submission by the Principal Financial Officer - The report was duly signed on August 1, 2025, by Tracy A. McLauchlin, Senior Vice President, Chief Financial Officer and Treasurer, as the Principal Financial Officer and Authorized Signatory[200][201]