IES Holdings(IESC) - 2024 Q2 - Quarterly Results

Fiscal 2024 Second Quarter Financial Highlights IES Holdings reported a strong second quarter for fiscal 2024, with significant year-over-year growth across key financial metrics, driven by robust demand and improved margins Overview of Q2 2024 Results IES Holdings reported a strong second quarter for fiscal 2024, with significant year-over-year growth across key financial metrics, driven by robust demand in residential housing and data center markets, coupled with improved margins from operational efficiencies Q2 Fiscal 2024 Key Financial Metrics (YoY Comparison) | Metric | Q2 FY 2024 | Q2 FY 2023 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $706 million | $569 million | +24% | | Operating Income | $77.7 million | $31.6 million | +146% | | Net Income Attributable to IES | $52.9 million | $21.6 million | +146% | | Diluted EPS | $2.29 | $0.92 | +149% | | Adjusted Net Income | $52.9 million | $24.6 million | +115% | | Adjusted Diluted EPS | $2.29 | $1.07 | +114% | - The company's future revenue streams appear solid, with remaining performance obligations (RPO) at approximately $1.1 billion and a total backlog of $1.4 billion as of March 31, 2024[5] - Subsequent to the quarter's end, IES completed the acquisition of Greiner Industries to expand the product offerings, capacity, and geographic reach of its Infrastructure Solutions business[5][7] Management Commentary and Business Outlook Management expressed satisfaction with Q2 performance, attributing it to strategic investments and strong end markets, while highlighting a strong financial position for future growth CEO and Management Outlook Management expressed satisfaction with the Q2 performance, attributing it to strategic investments and strong end markets, particularly in residential housing and data centers, while highlighting margin benefits from process improvements and operating leverage, and a strong cash position with no debt - CEO Jeff Gendell credited the strong performance to investments supporting organic growth and continued strength in residential and data center markets[4] - Strategic expansion of the Infrastructure Solutions segment was a key focus, evidenced by the acquisition of Greiner Industries and the leasing of a new fabrication facility in Rock Hill, South Carolina[7] - CFO Tracy McLauchlin highlighted the strong financial position with $106.0 million in cash and no debt, while also noting that the company will have a higher cash tax rate in fiscal 2024 due to the utilization of federal tax net operating loss carryforwards in fiscal 2023[12] - President and COO Matt Simmes emphasized the focus on improving procurement, contract terms, and labor management to drive margin expansion, particularly in the Commercial & Industrial segment[12] Segment Performance Analysis Analysis of segment performance reveals significant revenue and operating income growth across Communications, Residential, Infrastructure Solutions, and Commercial & Industrial segments Communications The Communications segment delivered substantial growth, with revenue increasing 37% year-over-year to $193.6 million, primarily driven by heightened demand from the data center end market, and operating income more than doubled to $21.9 million Communications Segment Performance (Q2 FY2024 vs Q2 FY2023) | Metric | Q2 FY 2024 | Q2 FY 2023 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $193.6 M | $141.1 M | +37.2% | | Operating Income | $21.9 M | $11.8 M | +85.6% | - The primary driver for the segment's revenue growth was increased demand across the business, with a particular strength noted in the data center market[7] Residential The Residential segment's revenue grew 11% to $339.3 million, supported by firm demand in the single-family housing market and strong execution in its multi-family business, with operating income more than doubling to $34.7 million Residential Segment Performance (Q2 FY2024 vs Q2 FY2023) | Metric | Q2 FY 2024 | Q2 FY 2023 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $339.3 M | $306.1 M | +10.8% | | Operating Income | $34.7 M | $16.8 M | +106.5% | - While the multi-family market outlook suggests a potential slowdown, the company expects to find growth opportunities through the expansion of its plumbing and HVAC offerings[8] Infrastructure Solutions This segment reported a 44% increase in revenue to $75.8 million, driven by strong demand for its custom power solutions, particularly generator enclosures for the data center market, and operating income nearly doubled to $16.1 million Infrastructure Solutions Segment Performance (Q2 FY2024 vs Q2 FY2023) | Metric | Q2 FY 2024 | Q2 FY 2023 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $75.8 M | $52.6 M | +44.1% | | Operating Income | $16.1 M | $8.2 M | +96.3% | - Growth was primarily fueled by continued strong demand in the custom power solutions business, serving the data center end market[9] Commercial & Industrial The Commercial & Industrial segment's revenue increased by 41% to $97.0 million, with operating income dramatically improving to $11.7 million from $0.4 million in the prior-year quarter, largely due to a strong contribution from a large data center project Commercial & Industrial Segment Performance (Q2 FY2024 vs Q2 FY2023) | Metric | Q2 FY 2024 | Q2 FY 2023 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $97.0 M | $69.0 M | +40.6% | | Operating Income | $11.7 M | $0.4 M | +2825% | - The improved results were largely driven by a strong contribution from a large data center project where performance exceeded estimates[11] Corporate Actions and Policies The company maintains an active stock repurchase program, with $37.6 million remaining available under the current authorization as of March 31, 2024 Stock Buyback Plan The company has an active stock repurchase program authorized by the Board of Directors in December 2022, with no shares repurchased during the second quarter of fiscal 2024, leaving $37.6 million available - The Company did not repurchase any shares during the quarter ended March 31, 2024[13] - As of March 31, 2024, $37.6 million remained available for repurchases under the existing $40 million stock repurchase program[13] Financial Statements The financial statements reflect IES Holdings' strong financial health, with significant revenue growth, increased profitability, robust cash position, and no long-term debt Condensed Consolidated Statement of Operations (Income Statement) The income statement for the three months ended March 31, 2024, shows a significant increase in profitability, with revenues growing to $705.8 million, gross profit to $171.6 million, operating income to $77.7 million, and net income attributable to IES to $52.9 million Income Statement Highlights (Three Months Ended March 31) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Revenues | $705.8 M | $568.9 M | | Gross Profit | $171.6 M | $100.9 M | | Operating Income | $77.7 M | $31.6 M | | Net Income Attributable to IES | $52.9 M | $21.6 M | Condensed Consolidated Balance Sheets As of March 31, 2024, the company's balance sheet reflects a strong financial position, with total assets growing to $1.1 billion, cash and cash equivalents increasing to $106.0 million, no long-term debt, and total stockholders' equity rising to $534.8 million Balance Sheet Highlights (As of) | Metric | March 31, 2024 | Sept 30, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $106.0 M | $75.8 M | | Total current assets | $796.5 M | $671.3 M | | Total assets | $1,101.2 M | $981.6 M | | Long-term debt | $0.0 M | $0.0 M | | Total liabilities | $506.2 M | $481.7 M | | Total stockholders' equity | $534.8 M | $449.9 M | Condensed Consolidated Statements of Cash Flows For the six months ended March 31, 2024, net cash provided by operating activities was $58.7 million, resulting in a net increase in cash of $30.2 million and an ending cash balance of $106.0 million Cash Flow Summary (Six Months Ended March 31, 2024) | Cash Flow Activity | Amount | | :--- | :--- | | Net cash provided by operating activities | $58.7 M | | Net cash used in investing activities | ($11.4 M) | | Net cash used in financing activities | ($17.1 M) | | Net increase in cash | $30.2 M | | Cash at end of period | $106.0 M | Non-GAAP Financial Measures and Reconciliations The company utilizes non-GAAP financial measures like adjusted net income, EPS, EBITDA, and backlog to provide clearer insights into underlying business trends and operational performance Definition of Non-GAAP Measures The company uses non-GAAP financial measures such as adjusted net income, adjusted EPS, adjusted EBITDA, and backlog to provide investors with useful information for identifying underlying business trends and comparing financial performance across periods - Non-GAAP measures are used to distinguish non-recurring events (e.g., litigation settlements, sale of a business) or non-cash events (e.g., impairment charges) to better identify underlying operational trends[15] - Backlog is a non-GAAP measure that includes GAAP-defined remaining performance obligations (RPO) plus signed agreements and letters of intent where work has not yet begun[16] Reconciliation of Adjusted Net Income and EPS For the second quarter of fiscal 2024, the company's adjusted net income attributable to IES was $52.9 million, with adjusted diluted EPS of $2.29, compared to an adjusted net income of $24.6 million and adjusted diluted EPS of $1.07 in the prior year Adjusted Net Income and EPS (Three Months Ended March 31) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Net Income Attributable to IES | $52.9 M | $21.6 M | | Adjusted Net Income Attributable to IES | $52.9 M | $24.6 M | | Adjusted Diluted EPS | $2.29 | $1.07 | Reconciliation of Adjusted EBITDA Adjusted EBITDA for the second quarter of fiscal 2024 was $83.1 million, a significant increase from $36.9 million in the prior-year quarter, calculated by adjusting net income for taxes, interest, depreciation, amortization, and non-cash equity compensation Adjusted EBITDA Reconciliation (Three Months Ended March 31) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Net Income Attributable to IES | $52.9 M | $21.6 M | | EBITDA | $81.6 M | $35.9 M | | Adjusted EBITDA | $83.1 M | $36.9 M | Backlog and Remaining Performance Obligations As of March 31, 2024, the company's total backlog stood at $1.36 billion, composed of $1.07 billion in remaining performance obligations (RPO) and an additional $298 million from signed agreements and letters of intent Backlog Reconciliation (As of March 31, 2024) | Component | Amount (in millions) | | :--- | :--- | | Remaining performance obligations | $1,065 | | Agreements without an enforceable obligation | $298 | | Total Backlog | $1,363 |