UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended ~~June 30, 2018~~March 31, 2019

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number1-13783

LOGO

IES Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware

76-0542208

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

5433 Westheimer Road, Suite 500, Houston, Texas 77056

(Address of principal executive offices and ZIP code)

Registrant’s telephone number, including area code:(713) 860-1500

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol

Name of each exchange

on which registered

Common Stock, par value $0.01 per share

Rights to Purchase Preferred Stock

IESC

NASDAQ Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 ofRegulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated ~~filer”,~~filer,” “accelerated ~~filer”,~~filer,” “smaller reporting ~~company”~~company,” and “emerging growth company” inRule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act). Yes ☐ No ☒

On ~~August 1, 2018,~~May 2, 2019, there were ~~21,205,536~~21,368,483 shares of common stock outstanding.

IES HOLDINGS, INC. AND SUBSIDIARIES

INDEX


	Page
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Balance Sheets as of ~~June 30, 2018~~March 31, 2019 and September 30, ~~2017~~2018		6

Condensed Consolidated Statements of Comprehensive Income for the Three and ~~Nine~~Six Months Ended ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~		7

Condensed Consolidated Statements of ~~Cash Flows~~Stockholders’ Equity for the ~~Nine~~Three and Six Months Ended ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~		9

Condensed Consolidated Statements of Cash Flows for the Six Months Ended March 31, 2019 and 2018		10

Notes to Condensed Consolidated Financial Statements		1011

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		2426

Item 3. Quantitative and Qualitative Disclosures About Market Risk		3536

Item 4. Controls and Procedures		3536

PART II. OTHER INFORMATION

Item 1. Legal Proceedings		3536

Item 1A. Risk Factors		3637

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		3738

Item 3. Defaults Upon Senior Securities		3738

Item 4. Mine Safety Disclosures		3738

Item 5. Other Information		3738

Item 6. Exhibits		3738

Signatures		3941

PART I. FINANCIAL INFORMATION

DEFINITIONS

In this Quarterly Report onForm 10-Q, the words “IES”, the “Company”, the “Registrant”, “we”, “our”, “ours” and “us” refer to IES Holdings, Inc. and, except as otherwise specified herein, to our subsidiaries.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form10-Q includes certain statements that may be deemed “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, all of which are based upon various estimates and assumptions that the Company believes to be reasonable as of the date hereof. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “could,” “should,” “expect,” “plan,” “project,” “intend,” “anticipate,” “believe,” “seek,” “estimate,” “predict,” “potential,” “pursue,” “target,” “continue,” the negative of such terms or other comparable terminology. These statements involve risks and uncertainties that could cause the Company’s actual future outcomes to differ materially from those set forth in such statements. Such risks and uncertainties include, but are not limited to:

the ability of our controlling ~~shareholder~~stockholder to take action not aligned with other ~~shareholders;~~stockholders;

the sale or disposition of the shares of our common stock held by our controlling ~~shareholder,~~stockholder, which, under certain circumstances, would trigger change of control provisions in our severance benefit plan or financing and surety arrangements, or any other substantial sale of our common stock, which could depress our stock price;

the possibility that certain tax benefits of our net operating losses may be restricted or reduced in a change in ownership or a further change in the federal tax rate;

the potential recognition of valuation allowances or ~~further~~ write-downs on deferred tax assets;

the inability to carry out plans and strategies as expected, including our inability to identify and complete acquisitions that meet our investment criteria in furtherance of our corporate strategy, or the subsequent underperformance of those acquisitions;

limitations on the availability of sufficient credit or cash flow to fund our working capital needs and capital expenditures and debt service;

difficulty in fulfilling the covenant terms of our ~~revolving~~ credit facility, including liquidity, EBITDA and other financial requirements, which could result in a default and acceleration of our indebtedness under our revolving credit facility;

the possibility that we issue additional shares of common stock or convertible securities that will dilute the percentage ownership interest of existing stockholders and may dilute the book value per share of our common stock;

the relatively low trading volume of our common stock, which could depress our stock price;

competition in the industries in which we operate, both from third parties and former employees, which could result in the loss of one or more customers or lead to lower margins on new projects;

future capital expenditures and refurbishment, repair and upgrade costs; and delays in and costs of refurbishment, repair and upgrade projects;

a general reduction in the demand for our services;

our ability to enter into, and the terms of, future contracts;

success in transferring, renewing and obtaining electrical and other licenses;

challenges integrating new businesses into the Company or new types of work, products or processes into our segments;

credit and capital market conditions, including changes in interest rates that affect the cost of construction financing and mortgages, and the inability for some of our customers to retain sufficient financing, which could lead to project delays or cancellations;

backlog that may not be realized or may not result in profits;

the possibility of errors when estimating revenue and progress to date onpercentage-of-completion contracts;

uncertainties inherent in estimating future operating results, including revenues, operating income or cash flow;

complications associated with the incorporation of new accounting, control and operating procedures;

closures or sales of facilities resulting in significant future charges, including potential warranty losses or other unexpected liabilities, or a significant disruption of our operations;

an increased cost of surety bonds affecting margins on work and the potential for our surety providers to refuse bonding or require additional collateral at their discretion;

fluctuations in operating activity due to downturns in levels of construction or the housing market, seasonality and differing regional economic conditions;

our ability to successfully manage projects;

inaccurate estimates used when entering into fixed-priced contracts;

the cost and availability of qualified labor and the ability to maintain positive labor relations;

our ability to pass along increases in the cost of commodities used in our business, in particular, copper, aluminum, steel, fuel and certain plastics;

a change in the mix of our customers, contracts or business;

increases in bad debt expense and days sales outstanding due to liquidity problems faced by our customers;

the recognition of potential goodwill, long-lived assets and other investment impairments;

potential supply chain disruptions due to credit or liquidity problems faced by our suppliers;

accidents resulting from the physical hazards associated with our work and the potential for accidents;

the possibility that our current insurance coverage may not be adequate or that we may not be able to obtain a policy at acceptable rates;

the possibility that our internal controls over financial reporting and our disclosure controls and procedures may not prevent all possible errors that could occur;

disagreements with taxing authorities with regard to tax positions we have adopted;

the recognition of tax benefits related to uncertain tax positions;

the effect of litigation, claims and contingencies, including warranty losses, damages or other latent defect claims in excess of our existing reserves and accruals;

growth in latent defect litigation in states where we provide residential electrical work for home builders not otherwise covered by insurance;

interruptions to our information systems and cyber security or data breaches;

liabilities under laws and regulations protecting the environment; and

loss of key personnel and effective transition of new management.

You should understand that the foregoing, as well as other risk factors discussed in this document and those listed in Part I, Item 1A of our Annual Report on Form10-K for the fiscal year ended September 30, ~~2017,~~2018, could cause future outcomes to differ materially from those experienced previously or those expressed in such forward-looking statements. We undertake no obligation to publicly update or revise any information, including information concerning our controlling ~~shareholder,~~stockholder, net operating losses, borrowing availability or cash position, or any forward-looking statements to reflect events or circumstances that may arise after the date of this report. Forward-looking statements are provided in this Quarterly Report onForm 10-Q pursuant to the safe harbor established under the Private Securities Litigation Reform Act of 1995 and should be evaluated in the context of the estimates, assumptions, uncertainties and risks described herein.

Item 1.Financial Statements

~~Item 1.~~

~~Financial Statements~~

IES HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In Thousands, Except Share Information)


	June 30,			September 30,
	2018			2017			March 31, 2019			September 30, 2018
	(Unaudited)						(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	21,692		$	28,290		$	16,158		$	26,247
Accounts receivable:
Trade, net of allowance of $738 and $650, respectively		139,182			142,946
Trade, net of allowance of $1,015 and $868, respectively								160,946			151,578
Retainage		23,019			21,360			22,904			24,312
Inventories		18,717			16,923			23,729			20,966
Costs and estimated earnings in excess of billings		22,595			13,438			28,293			31,446
Prepaid expenses and other current assets		8,824			8,795			10,897			8,144

Total current assets		234,029			231,752			262,927			262,693

Property and equipment, net		25,217			24,643			26,520			25,364
Goodwill		49,299			46,693			50,622			50,702
Intangible assets, net		31,736			31,413			28,459			30,590
Deferred tax assets		49,597			86,211			43,081			46,580
Othernon-current assets		6,085			3,782			5,662			6,065

Total assets	$	395,963		$	424,494		$	417,271		$	421,994

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses		117,385			120,710			129,704			130,591
Billings in excess of costs and estimated earnings		25,812			29,918			32,932			33,826

Total current liabilities		143,197			150,628			162,636			164,417

Long-term debt		29,634			29,434			19,672			29,564
Othernon-current liabilities		4,412			4,457			3,655			4,374

Total liabilities		177,243			184,519			185,963			198,355

Noncontrolling interest		3,247			3,271			3,163			3,232
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 21,205,536 and 21,336,975 outstanding, respectively		220			220
Treasury stock, at cost, 843,993 and 712,554 shares, respectively		(8,937	)		(6,898	)
Common stock, $0.01 par value, 100,000,000 shares authorized; 22,049,529 issued and 21,381,847 and 21,205,536 outstanding, respectively								220			220
Treasury stock, at cost, 667,682 and 843,993 shares, respectively								(8,443	)		(8,937	)
Additionalpaid-in capital		196,551			196,955			191,579			196,810
Retained earnings		27,639			46,427			44,789			32,314

Total stockholders’ equity		215,473			236,704			228,145			220,407

Total liabilities and stockholders’ equity	$	395,963		$	424,494		$	417,271		$	421,994

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

IES HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

(In Thousands, Except Share Information)

(Unaudited)


	Three Months Ended June 30,						Three Months Ended March 31,
	2018			2017			2019			2018
Revenues	$	232,576		$	208,323		$	256,914		$	205,677
Cost of services		190,039			172,925			213,679			171,837

Gross profit		42,537			35,398			43,235			33,840
Selling, general and administrative expenses		32,372			30,771			35,070			29,647
Contingent consideration		81			(33	)		(149	)		71
Gain on sale of assets		(5	)		(55	)
Loss (gain) on sale of assets								98			(20	)

Operating income		10,089			4,715			8,216			4,142

Interest and other (income) expense:
Interest expense		513			407			535			473
Other income, net		(111	)		(46	)
Other (income) expense, net								(112	)		(43	)

Income from operations before income taxes		9,687			4,354			7,793			3,712
Provision (Benefit) for income taxes		1,038			(1,519	)
Provision for income taxes								2,336			1,425

Net income		8,649			5,873			5,457			2,287

Net income attributable to noncontrolling interest		(133	)		(5	)
Net (income) loss attributable to noncontrolling interest								32			(66	)

Comprehensive income attributable to IES Holdings, Inc.	$	8,516		$	5,868		$	5,489		$	2,221

Earnings per share attributable to IES Holdings, Inc.:
Basic	$	0.40		$	0.27		$	0.26		$	0.11
Diluted	$	0.40		$	0.27		$	0.26		$	0.11

Shares used in the computation of earnings per share:
Basic		21,200,635			21,300,716			21,139,096			21,182,268
Diluted		21,331,883			21,556,118			21,379,746			21,440,570

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

IES HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

(In Thousands, Except Share Information)

(Unaudited)


	Nine Months Ended June 30,						Six Months Ended March 31,
	2018			2017			2019			2018
Revenues	$	636,553		$	604,163		$	500,756		$	403,977
Cost of services		527,112			501,769			415,920			337,073

Gross profit		109,441			102,394			84,836			66,904
Selling, general and administrative expenses		92,108			89,085			67,156			59,736
Contingent consideration		152			50			(115	)		71
Gain on sale of assets		(39	)		(68	)
Loss (gain) on sale of assets								95			(34	)

Operating income		17,220			13,327			17,700			7,131

Interest and other (income) expense:
Interest expense		1,427			1,281			1,082			914
Other income, net		(252	)		(94	)
Other (income) expense, net								(65	)		(141	)

Income from operations before income taxes		16,045			12,140			16,683			6,358
Provision for income taxes		34,622			1,792			4,243			33,584

Net income (loss)		(18,577	)		10,348			12,440			(27,226	)

Net income attributable to noncontrolling interest		(255	)		(72	)		(67	)		(122	)

Comprehensive income (loss) attributable to IES Holdings, Inc.	$	(18,832	)	$	10,276		$	12,373		$	(27,348	)

Earnings (loss) per share attributable to IES Holdings, Inc.:
Basic	$	(0.89	)	$	0.48		$	0.58		$	(1.29	)
Diluted	$	(0.89	)	$	0.48		$	0.58		$	(1.29	)

Shares used in the computation of earnings per share:
Shares used in the computation of earnings (loss) per share:
Basic		21,193,306			21,295,254			21,187,834			21,189,641
Diluted		21,193,306			21,550,804			21,424,522			21,189,641

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

IES HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of ~~Cash Flows~~Stockholders’ Equity (unaudited)

(In ~~Thousands)~~

~~(Unaudited)~~Thousands, Except Share Information)

   Nine Months Ended June 30,
   2018 2017
CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)
   $ (18,577 ) $ 10,348
Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Bad debt expense
   250 31
Deferred financing cost amortization
   214 229
Depreciation and amortization
   6,706 6,884
Gain on sale of assets
   (39 ) (68 )
Deferred income taxes
   34,622 494
Non-cash compensation
   (395 ) 1,329
Changes in operating assets and liabilities, net of effects of acquisitions and divestitures:

Accounts receivable
   4,992 (1,593 )
Inventories
   (1,721 ) (3,919 )
Costs and estimated earnings in excess of billings
   (8,990 ) (3,151 )
Prepaid expenses and other current assets
   (1,645 ) (9,082 )
Othernon-current assets
   270 350
Accounts payable and accrued expenses
   (6,862 ) 600
Billings in excess of costs and estimated earnings
   (4,019 ) 6,438
Othernon-current liabilities
   172 1,312


Net cash provided by operating activities
   4,978 10,202


CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment
   (3,383 ) (3,796 )
Proceeds from sale of property and equipment
   107 237
Cash paid for acquisitions
   (5,981 ) (14,659 )


Net cash used in investing activities
   (9,257 ) (18,218 )


CASH FLOWS FROM FINANCING ACTIVITIES:

Borrowings of debt
   99 5,313
Repayments of debt
   (136 ) (5,328 )
Contingent consideration payment
   —   (448 )
Distribution to noncontrolling interest
   (235 ) (153 )
Options exercised
   11 207
Purchase of treasury stock
   (2,058 ) (891 )


Net cash used in financing activities
   (2,319 ) (1,300 )


NET DECREASE IN CASH AND CASH EQUIVALENTS
   (6,598 ) (9,316 )
CASH, CASH EQUIVALENTS and RESTRICTED CASH, beginning of period
   28,290 33,221


CASH, CASH EQUIVALENTS and RESTRICTED CASH, end of period
   $ 21,692 $ 23,905


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid for interest
   $ 1,227 $ 1,108
Cash paid for income taxes
   $ 2,313 $ 2,285


	Three Months Ended March 31, 2019
	Common Stock				Treasury Stock						APIC			Retained Earnings		Total Stockholders’ Equity
	Shares		Amount		Shares			Amount			APIC			Retained Earnings		Total Stockholders’ Equity
BALANCE, December 31, 2018		22,049,529	$	220		(763,426	)	$	(8,896	)	$	194,607		$	39,300	$	225,231
Issuances under compensation plans		—		—		3,991			71			(71	)		—		—
Grants under compensation plan		—		—		283,195			3,582			(3,582	)		—		—
Acquisition of treasury stock		—		—		(191,442	)		(3,200	)		—			—		(3,200	)
Non-cash compensation		—		—		—			—			625			—		625
Net income attributable to IES Holdings, Inc.		—		—		—			—			—			5,489		5,489

BALANCE, March 31, 2019		22,049,529	$	220		(667,682	)	$	(8,443	)	$	191,579		$	44,789	$	228,145


	Three Months Ended March 31, 2018
	Common Stock				Treasury Stock						APIC			Retained Earnings		Total Stockholders’ Equity
	Shares		Amount		Shares			Amount			APIC			Retained Earnings		Total Stockholders’ Equity
BALANCE, December 31, 2017		22,049,529	$	220		(710,784	)	$	(6,881	)	$	197,312		$	16,858	$	207,509
Grants under compensation plans		—		—		250			2			(2	)		—		—
Acquisition of treasury stock		—		—		(79,817	)		(1,229	)		—			—		(1,229	)
Non-cash compensation		—		—		—			—			(475	)		—		(475	)
Increase in noncontrolling interest		—		—		—			—			—			44		44
Net income attributable to IES Holdings, Inc.		—		—		—			—			—			2,221		2,221

BALANCE, March 31, 2018		22,049,529	$	220		(790,351	)	$	(8,108	)	$	196,835		$	19,123	$	208,070


	Six Months Ended March 31, 2019
	Common Stock				Treasury Stock						APIC			Retained Earnings		Total Stockholders’ Equity
	Shares		Amount		Shares			Amount			APIC			Retained Earnings		Total Stockholders’ Equity
BALANCE, September 30, 2018		22,049,529	$	220		(843,993	)	$	(8,937	)	$	196,810		$	32,314	$	220,407
Issuances under compensation plans		—		—		216,679			2,323			(2,323	)		—		—
Grants under compensation plan		—		—		283,195			3,582			(3,582	)		—		—
Cumulative effect adjustment from adoption of new accounting standard		—		—		—			—			—			102		102
Acquisition of treasury stock		—		—		(323,563	)		(5,411	)		—			—		(5,411	)
Non-cash compensation		—		—		—			—			674			—		674
Net income attributable to IES Holdings, Inc.		—		—		—			—			—			12,373		12,373

BALANCE, March 31, 2019		22,049,529	$	220		(667,682	)	$	(8,443	)	$	191,579		$	44,789	$	228,145


	Six Months Ended March 31, 2018
	Common Stock				Treasury Stock						APIC			Retained Earnings			Total Stockholders’ Equity
	Shares		Amount		Shares			Amount			APIC			Retained Earnings			Total Stockholders’ Equity
BALANCE, September 30, 2017		22,049,529	$	220		(712,554	)	$	(6,898	)	$	196,955		$	46,427		$	236,704
Grants under compensation plans		—		—		520			5			(5	)		—			—
Acquisition of treasury stock		—		—		(79,817	)		(1,230	)					—			(1,230	)
Options exercised		—		—		1,500			15			(4	)		—			11
Non-cash compensation		—		—		—			—			(111	)		—			(111	)
Increase in noncontrolling interest		—		—		—			—			—			44			44
Net loss attributable to IES Holdings, Inc.		—		—		—			—			—			(27,348	)		(27,348	)

BALANCE, March 31, 2018		22,049,529	$	220		(790,351	)	$	(8,108	)	$	196,835		$	19,123		$	208,070

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

IES HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In Thousands)

(Unaudited)


	Six Months Ended March 31,
	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	12,440		$	(27,226	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Bad debt expense		248			96
Deferred financing cost amortization		156			142
Depreciation and amortization		4,846			4,269
Loss (gain) on sale of assets		95			(34	)
Non-cash compensation expense		674			(111	)
Deferred income taxes		4,243			33,584
Changes in operating assets and liabilities:
Accounts receivable		(9,616	)		14,945
Inventories		(2,873	)		(665	)
Costs and estimated earnings in excess of billings		3,152			(1,921	)
Prepaid expenses and other current assets		(764	)		97
Othernon-current assets		(1,370	)		(52	)
Accounts payable and accrued expenses		(144	)		(10,081	)
Billings in excess of costs and estimated earnings		(948	)		(2,098	)
Othernon-current liabilities		(736	)		214

Net cash provided by operating activities		9,403			11,159

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(3,929	)		(2,327	)
Proceeds from sale of assets		7			94
Cash paid in conjunction with business combinations		—			(175	)

Net cash used in investing activities		(3,922	)		(2,408	)
			��
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of debt		122			68
Repayments of debt		(10,144	)		(109	)
Distribution to noncontrolling interest		(137	)		(69	)
Purchase of treasury stock		(5,411	)		(1,229	)
Issuance of shares		—			11

Net cash used in financing activities		(15,570	)		(1,328	)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(10,089	)		7,423
CASH, CASH EQUIVALENTS and RESTRICTED CASH, beginning of period		26,247			28,290

CASH, CASH EQUIVALENTS and RESTRICTED CASH, end of period	$	16,158		$	35,713

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest	$	1,008		$	788
Cash paid for income taxes (net)	$	523		$	1,456

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

IES HOLDINGS, INC.

Notes to the Condensed Consolidated Financial Statements

(All Amounts in Thousands Except Share Amounts)

(Unaudited)

1. BUSINESS AND ACCOUNTING POLICIES

Description of the Business

IES Holdings, Inc. is a holding company that owns and manages operating subsidiaries in business activities across a variety of end markets. Our operations are currently organized into four principal business segments, based upon the nature of our current services:

•

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.

•

Communications – Nationwide provider of technology infrastructure products and services to large corporations and independent businesses.

•

Infrastructure Solutions– Provider of electro-mechanical solutions for industrial ~~operations.~~operations, including apparatus repair and custom-engineered products.

•

Residential – Regional provider of electrical installation services for single-family housing and multi-family apartment complexes.

The words “IES”, the “Company”, “we”, “our”, and “us” refer to IES Holdings, Inc. and, except as otherwise specified herein, to our ~~wholly-owned~~ subsidiaries.

Seasonality and Quarterly Fluctuations

Results of operations from our Residential construction segment are seasonal, depending on weather trends, with typically higher revenues generated during spring and summer and lower revenues generated during fall and winter, with an impact from precipitation in the warmer months. The Commercial & Industrial, Communications and Infrastructure Solutions segments of our business are less subject to seasonal trends, as work in these segments generally is performed inside structures protected from the weather, although weather can still impact these businesses, especially in the early stages of projects. Our service and maintenance business is generally not affected by seasonality. Our volume of business may be adversely affected by declines in construction projects resulting from adverse regional or national economic conditions. Quarterly results may also be materially affected by the timing of new construction projects. Results for our Infrastructure Solutions segment may be affected by the timing of outages at our customers’ facilities. Accordingly, operating results for any fiscal period are not necessarily indicative of results that may be achieved for any subsequent fiscal period.

Basis of Financial Statement Preparation

The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of IES, ~~its~~our wholly-owned subsidiaries, and entities that we control due to ownership of a majority of voting interest and have been prepared in accordance with the instructions to interim financial reporting as prescribed by the Securities and Exchange Commission (the “SEC”). The results for the interim periods are not necessarily indicative of results for the entire year. These interim financial statements do not include all disclosures required by U.S. generally accepted accounting principles (“GAAP”), and should be read in conjunction with the consolidated financial statements and notes thereto filed with the SEC in our Annual Report on Form10-K for the fiscal year ended September 30, ~~2017.~~2018. In the opinion of management, the unaudited Condensed Consolidated Financial Statements contained in this report include all known accruals and adjustments necessary for a fair presentation of the financial position, results of operations, and cash flows for the periods reported herein. Any such adjustments are of a normal recurring nature.

Noncontrolling Interest

In connection with our acquisitions of STR Mechanical, LLC (“STR Mechanical”) in fiscal 2016 and NEXT Electric, LLC (“NEXT Electric”) 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 seller. The interests retained by those third party sellers are identified on our Condensed 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

IES HOLDINGS, INC.

Notes to the Condensed Consolidated Financial Statements

(All Amounts in Thousands Except Share Amounts)

(Unaudited)

require us to purchase, part or all of the remaining 20 percent interest in the applicable entity. The purchase price is variable, based on

~~IES HOLDINGS, INC.~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~(All Amounts in Thousands Except Share Amounts)~~

~~(Unaudited)~~

a multiple of earnings as defined in the operating agreements. Therefore, this noncontrolling interest is carried at the greater of the balance determined under ~~ASC~~Accounting Standards Codification (“ASC”) 810 and the redemption amounts assuming the noncontrolling interests were redeemable at the balance sheet date. If all of these interests had been redeemable at ~~June 30, 2018,~~March 31, 2019, the redemption amount would have been ~~$2,995. See Note 13, “Business Combinations” for further discussion.~~$1,428. For the ~~nine~~six months ended ~~June 30,~~March 31, 2018, we recorded an increase to retained earnings of $44 to decrease the carrying amount of the noncontrolling interest in STR Mechanical to the balance determined under ASC 810, as, if it had been redeemable at ~~June 30, 2018, as~~March 31, 2019, the redemption amount would have been less than the carrying amount.

Use of Estimates

The preparation of financial statements in conformity with 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 and analyzing goodwill, investments, intangible assets and long-lived asset impairments and adjustments, allowance for doubtful accounts receivable, stock-based compensation, reserves for legal matters, realizability of deferred tax assets, unrecognized tax benefits and self-insured claims liabilities and related reserves.

Income Taxes

In December 2017, the Tax Cuts and Jobs Act (the “Act”) was enacted, which, among other changes, reduced the federal statutory corporate tax rate from 35% to 21%, effective January 1, 2018. As a result of this change, the Company’s statutory tax rate for fiscal 2018 ~~will be~~was a blended rate of 24.53% and ~~will decrease~~decreased to 21% ~~thereafter.~~in 2019. For the ~~nine~~six months ended ~~June 30,~~March 31, 2018, our effective tax rate differed from the statutory tax rate as a result of a ~~preliminary~~ charge of ~~$31,506~~$31,487 tore-measure our deferred tax assets and liabilities to reflect the ~~estimated~~ impact of the new statutory tax ~~rate, slightly offset by a benefit~~rate. The Company completed its accounting for the income tax effects of ~~$1,840 related to~~ the ~~reversal of an uncertain tax position. This benefit differs from~~Act and fully recorded the ~~expected recognition of $3,284 as disclosed~~impact in ~~our Form10-K~~ ~~for~~ the year ended September 30, ~~2017 as a result of the decrease in the statutory tax rate. The preliminary charge tore-measure~~ our deferred tax assets is subject to completion of our analysis of the impact of the Act, including as it relates to future deductions for executive compensation expense, as well as the effect of changes in the utilization of net deferred tax assets that reverse in fiscal 2018 as compared to subsequent years.2018.

Accounting Standards Not Yet Adopted

In ~~May 2014,~~February 2016, the Financial Accounting Standards Board (“FASB”) issued ~~ASU~~Accounting Standard UpdateNo. ~~2014-09,~~2016-02, ~~Revenue from Contracts with Customers,~~Leases (“ASU2016-02”). Under ASU2016-02, lessees will need to recognize a ~~comprehensive new revenue recognition standard which~~right-of-use asset and a lease liability on our Balance Sheet for all leases, other than those that meet the definition of a short-term lease. For income statement purposes, leases must be classified as either operating or finance. Operating leases will ~~supersede previous existing revenue recognition guidance. The standard creates a five-step model for revenue recognition that requires companies~~result in straight-line expense, similar to ~~exercise judgment when considering contract terms and relevant facts and circumstances. The standard also requires expanded disclosures surrounding revenue recognition. The effective date~~current operating leases, while finance leases will be accounted for similar to current capital leases. ASU2016-02 becomes effective for the ~~first quarter of our~~ fiscal year ended September 30, ~~2019.~~2020. We are currently evaluating the impact it will have on our Condensed Consolidated Financial Statements.

In June 2016, the FASB issued Accounting Standard UpdateNo. 2016-13, Financial Instruments – Credit Losses (“ASU2016-13”), which requires companies to consider historical experiences, current market conditions and reasonable and supportable forecasts in the measurement of expected credit losses. This update is effective for fiscal years beginning after December 15, 2019 and for interim periods within those fiscal years, although early adoption is permitted. We are currently evaluating the impact it will have on our Condensed Consolidated Financial Statements.

In June 2018, the FASB issued Accounting Standard UpdateNo. 2018-07, Compensation—Stock Compensation (“ASU2018-07”), to simplify the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments for employees, with certain exceptions. Under the new guidance, the cost for nonemployee awards may be lower and less volatile than under current GAAP because the measurement generally will occur earlier and will be fixed at the grant date. This update is effective for the fiscal year ended September 30, 2020.

In August 2018, the FASB issued Accounting Standard UpdateNo. 2018-13, Fair Value Measurement Disclosure Framework (“ASU2018-13”), to modify certain disclosure requirements for fair value measurements. Under the new guidance, registrants will need to disclose weighted average information for significant unobservable inputs for all Level 3 fair value measurements. The ~~standard allows~~guidance does not specify how entities should calculate the weighted average, but requires them to explain their calculation. The new guidance also requires disclosing the changes in unrealized gain and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements of instruments held at the end of the reporting period. This guidance is effective for fiscal years beginning after December 15, 2019 and for interim periods within those fiscal years, although early adoption is permitted for either ~~full retrospective~~the entire standard or ~~modified retrospective adoption,~~only the provisions that eliminate or modify the requirements.

IES HOLDINGS, INC.

Notes to the Condensed Consolidated Financial Statements

(All Amounts in Thousands Except Share Amounts)

(Unaudited)

We do not expect ASU2018-07 or ASU2018-13 to have a material effect on our Condensed Consolidated Financial Statements

Accounting Standards Recently Adopted

In May 2014, the FASB issued Accounting Standard UpdateNo. 2014-09, which provides a single comprehensive accounting standard for revenue recognition for contracts with customers and ~~we plan~~supersedes prior industry-specific guidance. The new standard requires companies to ~~use~~recognize revenue when control of promised goods or services is transferred to customers at an amount that reflects the consideration to which the company expects to be entitled. The new model requires companies to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time for each obligation. The new standard also expands disclosure requirements regarding revenue and cash flows arising from contracts with customers.

We adopted the new revenue recognition standard on October 1, 2018 (“Adoption Date”), using the modified retrospective ~~basis~~method, which provides for a cumulative effect adjustment to beginning fiscal 2019 retained earnings for uncompleted contracts impacted by the adoption. We recorded an adjustment of $102 to beginning fiscal 2019 retained earnings as a result of adoption of the new standard. The changes to the method and/or timing of our revenue recognition associated with the new standard primarily affect revenue recognition within our Infrastructure Solutions segment for which, as of October 1, 2018, certain of our contracts do not qualify for revenue recognition over time. In addition, we have now combined in process contracts that historically had been accounted for as separate contracts in cases where those contracts meet the criteria for combination of contracts under the new standard, and we now capitalize certain commissions which were previously expensed when incurred. The impact on our results for the quarter and year ended March 31, 2019, of applying the new standard to our contracts was not material.

Consistent with our adoption ~~date.~~method, the comparative prior period information for the three and six months ended March 31, 2018, continues to be reported using the previous accounting standards in effect for the period presented. We ~~are continuing~~have elected to utilize the modified retrospective transition practical expedient that allows us to evaluate the impact of contract modifications as of the ~~adoption~~Adoption Date rather than evaluating the impact of ~~this standard on our Condensed Consolidated Financial Statements. In particular, we believe~~ the ~~most significant areas where we expect some impact~~modifications at the time they occurred prior to ~~our current accounting will be contract termination provisions, identification of performance obligations, and accounting~~the Adoption Date.

See Note 3, “Revenue Recognition” for ~~commissions paid. We expect that we will continue to recognize revenues for most~~additional discussion of our ~~fixed-price contracts over time, as services are performed, although we have identified a limited number of arrangements where we currently recognize~~ revenue over time, but will no longer do so under the new standard. The impact of this standard on our Consolidated Financial Statements will be determined by the specific terms of contracts in progress at the adoption daterecognition accounting policies and ~~our progress on those projects. We are also continuing to assess the necessary changes in processes and controls to meet the disclosure requirements of the new standard.~~expanded disclosures.

In January 2016, the FASB issued ~~ASU~~Accounting Standard UpdateNo. 2016-01, Financial ~~Instruments (“ASU2016-01”).~~Instruments. This standard is associated with the recognition and measurement of financial assets and liabilities, with further clarifications made in February 2018 with the issuance of Accounting Standard Update No.~~ASU~~ 2018-03. The amended guidance requires certain equity investments that are not consolidated and not accounted for under the equity method to be measured at fair value with changes in fair value recognized in net income rather than as a component of accumulated other comprehensive income (loss). It further states that an entity may choose to measure equity investments that do not have readily determinable fair values using a quantitative approach, or measurement alternative, which is equal to its cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. ~~This update is effective for annual financial reporting periods, and interim periods within those annual periods, beginning after December 15, 2017, although early~~Our adoption ~~is permitted.~~

~~IES HOLDINGS, INC.~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~(All Amounts in Thousands Except Share Amounts)~~

~~(Unaudited)~~

~~In February 2016, the FASB issued ASUNo. 2016-02,~~ ~~Leases (“ASU2016-02”).~~ ~~Under ASU2016-02,~~ ~~lessees will need to recognize aright-of-use~~ ~~asset and a lease liability for all~~ of their leases, other than those that meet the definition of a short-term lease. For income statement purposes, leases must be classified as either operating or finance. Operating leases will result in straight-line expense, similar to current operating leases, while finance leases will result in a front-loaded pattern, similar to current capital leases. ASU~~2016-02~~ ~~becomes effective for the fiscal year ended September 30, 2020. We are currently evaluating the~~this standard on October 1, 2018 had no impact ~~it will have~~ on our Condensed Consolidated Financial Statements.

In January 2017, the FASB issued ~~ASU~~Accounting Standard UpdateNo. 2017-01, Business ~~Combinations (“ASU2017-01”).~~Combinations. This standard clarifies the definition of a business to assist entities with evaluation of whether transactions should be accounted for as acquisitions or disposals of assets or businesses. ~~The new~~Our adoption of this standard ~~is effective for interim and annual reporting periods beginning after December 15, 2017. The~~on October 1, 2018 using the prospective transition method ~~will be required for this new guidance.~~had no impact on our Condensed Consolidated Financial Statements.

In May 2017, the FASB issued ~~ASU~~Accounting Standard UpdateNo. 2017-09, Compensation—Stock Compensation, ~~(“ASU2017-09”),~~ to reduce the diversity in practice and the cost and complexity when changing the terms or conditions of a share-based payment award. ~~This update is effective for annual financial reporting periods, and interim periods within those annual periods, beginning after December 15, 2017, although early~~Our adoption ~~is permitted. The~~of this standard on October 1, 2018 using the prospective transition method ~~will be required for this new guidance.~~

~~We do not expect ASU2016-01,~~ ~~ASU2017-01~~ ~~or ASU2017-09~~ ~~to have a material effect on our Condensed Consolidated Financial Statements.~~

~~In June 2018, the FASB issued ASUNo. 2018-07,~~ Compensation—Stock Compensation, to simplify the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments for employees, with certain exceptions. Under the new guidance, the cost for nonemployee awards may be lower and less volatile than under current US GAAP because the measurement generally will occur earlier and will be fixed at the grant date. This update is effective for annual financial reporting periods, and interim periods within those annual periods, beginning after December 15, 2018, although early adoption is permitted. We are currently evaluating thehad no impact ~~it will have~~ on our Condensed Consolidated Financial Statements.

2. CONTROLLING ~~SHAREHOLDER~~STOCKHOLDER

~~At June 30, 2018,~~ Tontine ~~Capital Partners, L.P., together with~~Associates, L.L.C. and its affiliates (collectively, “Tontine”), ~~was~~is the Company’s controlling ~~shareholder,~~stockholder, owning approximately ~~59%~~57.5 percent of the Company’s outstanding common stock according to a ~~Form 4~~Schedule 13D/A filed with the SEC by Tontine on ~~July 2, 2018.~~January 11, 2019. 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.~~stockholders.

IES HOLDINGS, INC.

Notes to the Condensed Consolidated Financial Statements

(All Amounts in Thousands Except Share Amounts)

(Unaudited)

While Tontine is subject to certain restrictions under federal securities laws on sales of its shares as an affiliate, the Company has filed a shelf registration statement to register all of the shares of IES common stock owned by Tontine at the time of registration. As long as the 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 shelf registration statement and in any prospectus supplement filed in connection with an offering pursuant to the shelf registration statement.

Should Tontine sell or otherwise dispose of all or a portion of its position in IES, a change in ownership of IES could occur. A change in ownership, as defined by Internal Revenue Code Section 382, could reduce the availability of the Company’s net operating losses (“NOLs”) for federal and state income tax purposes. On November 8, 2016, the Company implemented a new tax benefit protection plan (the “NOL Rights Plan”). The NOL Rights Plan was designed to deter an acquisition of the Company’s stock in excess of a threshold amount that could trigger a change of control within the meaning of Internal Revenue Code Section 382. There can be no assurance that the NOL Rights Plan will be effective in deterring a change of ownership or protecting the NOLs. Furthermore, a change in control would trigger the change of control provisions in a number of our material agreements, including our credit facility, bonding agreements with our sureties and our severance arrangements.

Jeffrey L. Gendell was appointed as a member of the Board of Directors and as~~non-executive~~ Chairman of the Board in 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 ~~the~~

~~IES HOLDINGS, INC.~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~(All Amounts in Thousands Except Share Amounts)~~

~~(Unaudited)~~

our Board of Directors since February 2012, and who previously served as Interim Director of Operations ~~of the Company since~~from November 2017 ~~and who~~

~~previously served~~to January 2019, as~~non-executive~~ Vice Chairman of the Board from November 2016 to November 2017 and as~~non-executive~~ Chairman of the Board from January 2015 to November 2016. David B. Gendell was an employee of Tontine from 2004 until December 31, 2017.

The Company is party to a sublease agreement with Tontine Associates, ~~LLC, an affiliate of Tontine,~~L.L.C. for corporate office space in Greenwich, Connecticut. ~~The lease~~On May 1, 2019, sublease was ~~renewed~~extended for a ~~three-year~~six month term ~~in April 2016~~expiring December 31, 2019, with an increase in the monthly rent to ~~$8,~~$9, reflecting the increase paid by Tontine Associates, ~~LLC~~L.L.C. to its ~~landlord and the Company’s increased use of the corporate office space.~~landlord. The lease has terms at market rates, and payments by the Company are at a rate consistent with that paid by Tontine Associates, ~~LLC~~L.L.C. to its landlord.

On December 6, 2018, the Company entered into a Board Observer Letter Agreement with Tontine Associates, L.L.C. in order to assist Tontine in managing its investment in the Company. Subject to the terms and conditions set forth in the Letter 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 Letter 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 reasonableout-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.

3. REVENUE RECOGNITION

Contracts

Our revenue is derived from contracts with customers, and we determine the appropriate accounting treatment for each contract at contract 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.

IES HOLDINGS, INC.

Notes to the Condensed Consolidated Financial Statements

(All Amounts in Thousands Except Share Amounts)

(Unaudited)

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.

We recognize revenue over time for the majority of the services we perform 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 segment, 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 we have the right to bill the customer as costs are incurred. Such assessment involves an evaluation of contractual termination clauses. Where 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 fixed price arrangements, we 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 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.

Variable Consideration

The transaction price for our contracts may include variable consideration, which includes increases to transaction price for approved and unapproved change orders, claims and incentives, and reductions to transaction price for liquidated damages. 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 and performance obligation. We estimate variable consideration for a performance obligation 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 cumulativecatch-up basis. To the extent unapproved change orders and claims reflected in transaction price (or excluded from 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.

Costs of Obtaining a Contract

In certain of our operations, we incur commission costs related to entering into a contract that we only incurred because of that contract. When this occurs, we capitalize that cost and amortize it over the expected term of the contract. At March 31, 2019, we had capitalized commission costs of $100.

We generally do not incur significant incremental costs related to obtaining or fulfilling a contract prior to the start of a project. On rare occasions, when significantpre-contract costs are incurred, they will be capitalized and amortized on a percentage of completion basis over the life of the contract.

IES HOLDINGS, INC.

Notes to the Condensed Consolidated Financial Statements

(All Amounts in Thousands Except Share Amounts)

(Unaudited)

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. Our consolidated 2019 and 2018 revenue was derived from the following service activities. See details in the following tables:


	Three Months Ended March 31,				Six Months Ended March 31,
	2019		2018		2019		2018
Commercial & Industrial	$	79,975		65,589		152,558		118,591
Communications		70,437		50,244		139,762		104,703

Infrastructure Solutions
Industrial Services		12,145		10,404		24,368		21,457
Custom Power Solutions		22,305		13,462		39,561		24,094

Total		34,450		23,866		63,929		45,551

Residential
Single-family		51,492		43,594		101,968		88,208
Multi-family and Other		20,560		22,384		42,539		46,924

Total		72,052		65,978		144,507		135,132

Total Revenue	$	256,914	$	205,677	$	500,756	$	403,977


	Three Months Ended March 31, 2019
	Commercial & Industrial		Communications		Infrastructure Solutions		Residential		Total
Fixed-price	$	76,467	$	48,602	$	30,130	$	72,052	$	227,251
Time-and-material		3,508		21,835		4,320		—		29,663

Total revenue	$	79,975	$	70,437	$	34,450	$	72,052	$	256,914


	Three Months Ended March 31, 2018
	Commercial & Industrial		Communications		Infrastructure Solutions		Residential		Total
Fixed-price	$	58,183	$	37,344	$	20,636	$	65,978	$	182,141
Time-and-material		7,406		12,900		3,230		—		23,536

Total revenue	$	65,589	$	50,244	$	23,866	$	65,978	$	205,677


	Six Months Ended March 31, 2019
	Commercial & Industrial		Communications		Infrastructure Solutions		Residential		Total
Fixed-price	$	142,297	$	97,431	$	57,641	$	144,507	$	441,876
Time-and-material		10,261		42,331		6,288		—		58,880

Total revenue	$	152,558	$	139,762	$	63,929	$	144,507	$	500,756


	Six Months Ended March 31, 2018
	Commercial & Industrial		Communications		Infrastructure Solutions		Residential		Total
Fixed-price	$	107,103	$	81,500	$	40,309	$	135,132	$	364,044
Time-and-material		11,488		23,203		5,242		—		39,933

Total revenue	$	118,591	$	104,703	$	45,551	$	135,132	$	403,977

Accounts Receivable

Accounts receivable include amounts which we have billed or have an unconditional right to bill our customers. As of March 31, 2019, Accounts receivable included $10,173 of unbilled receivables for which we have an unconditional right to bill.

IES HOLDINGS, INC.

Notes to the Condensed Consolidated Financial Statements

(All Amounts in Thousands Except Share Amounts)

(Unaudited)

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 exceed cumulative billings and unbilled receivables to the customer under the contract are reflected as a current asset in our balance sheet under the caption “Costs and estimated earnings in excess of billings”. To the extent 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 balance sheet under the caption “Billings in excess of costs and estimated earnings”.

The net asset (liability) position for contracts in process consisted of the following:


	March 31, 2019			September 30, 2018
Costs and estimated earnings on uncompleted contracts	$	586,289		$	539,226
Less: Billings to date and unbilled accounts receivable		(590,928	)		(541,606	)

	$	(4,639	)	$	(2,380	)

The net asset (liability) position for contracts in process included in the accompanying consolidated balance sheets was as follows:


	March 31, 2019			September 30, 2018
Costs and estimated earnings in excess of billings	$	28,293		$	31,446
Billings in excess of costs and estimated earnings		(32,932	)		(33,826	)

	$	(4,639	)	$	(2,380	)

During the three months ended March 31, 2019, and 2018, we recognized revenue of $18,114 and $14,977 related to our contract liabilities at January 1, 2019 and 2018, respectively. During the six months ended March 31, 2019, and 2018, we recognized revenue of $24,701 and $25,575 related to our contract liabilities at October 1, 2018 and 2017, respectively.

We did not have any impairment losses recognized on our receivables or contract assets for the three and six months ended March 31, 2019 or 2018.

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 March 31, 2019, we had remaining performance obligations of $423,718. The Company expects to recognize revenue on approximately $376,680 of the remaining performance obligations over the next 12 months, with the remaining recognized thereafter.

For the three and six months ended March 31, 2019, net revenue recognized from our performance obligations satisfied in previous periods was not material.

4. DEBT

At ~~June 30, 2018,~~March 31, 2019, and September 30, ~~2017,~~2018, our long-term debt of ~~$29,634~~$19,672 and ~~$29,434,~~$29,564, respectively, primarily related to amounts drawn on our revolving credit facility. Our weighted-average annual interest rate on these borrowings was ~~3.74%~~4.52% at ~~June 30, 2018,~~March 31, 2019, and ~~3.04%~~3.86% at September 30, ~~2017.~~2018. At ~~June 30, 2018,~~March 31, 2019, we also had ~~$6,928~~$6,551 in outstanding letters of credit and total availability of ~~$47,231~~$71,698 under ~~this~~our revolving credit facility without violating our financial covenants.

~~On July 23, 2018, we entered into the Third Amendment (the “Amendment”)~~Pursuant to our Second Amended and Restated Credit and Security Agreement with Wells Fargo Bank, N.A. (as amended, the “Credit Agreement”).

Pursuant to the Amendment, we will be required to comply with the minimum EBITDA financial covenant of the Credit Agreement in a given quarter only if our Excess Availability (as defined in the Credit Agreement) in the immediately following quarter, as tested monthly during that quarter, falls below $30,000. If, in a subsequent quarter, Excess Availability levels return to or exceed the contractual threshold, then, the Company ~~will no longer be required to comply with the minimum EBITDA financial covenant, so long as Excess Availability remains above the threshold.~~

~~There have been no other changes~~is subject to the financial or other covenants disclosed in Item 7 of our Annual Report on Form10-K for the year ended September 30, ~~2017.~~2018.

IES HOLDINGS, INC.

Notes to the Condensed Consolidated Financial Statements

(All Amounts in Thousands Except Share Amounts)

(Unaudited)

There have been no other changes to those covenants. The Company was in compliance with the financial covenants as of ~~June 30, 2018.~~March 31, 2019.

At ~~June 30, 2018,~~March 31, 2019, the carrying value of amounts outstanding on our revolving credit facility approximated fair value, as debt incurs interest at a variable rate. The fair value of the debt is classified as a Level 2 measurement.

4.5. PER SHARE INFORMATION

The following tables reconcile the components of basic and diluted earnings per share for the three and ~~nine~~six months ended ~~June 30, 2018,~~March 31, 2019, and ~~2017:~~2018:


	Three Months Ended June 30,				Three Months Ended March 31,
	2018		2017		2019		2018
Numerator:
Net income attributable to common shareholders of IES Holdings, Inc.	$	8,513	$	5,824
Net income attributable to restricted shareholders of IES Holdings, Inc.		3		44
Net income attributable to common stockholders of IES Holdings, Inc.					$	5,467	$	2,250
Decrease in noncontrolling interest						—		(44	)
Net income attributable to restricted stockholders of IES Holdings, Inc.						22		15

Net income attributable to IES Holdings, Inc.	$	8,516	$	5,868	$	5,489	$	2,221

Denominator:
Weighted average common shares outstanding — basic		21,200,635		21,300,716		21,139,096		21,182,268
Effect of dilutive stock options andnon-vested restricted stock		131,248		255,402		240,650		258,302

Weighted average common and common equivalent shares outstanding — diluted		21,331,883		21,556,118		21,379,746		21,440,570

Earnings per share attributable to IES Holdings, Inc.:
Basic	$	0.40	$	0.27	$	0.26	$	0.11
Diluted	$	0.40	$	0.27	$	0.26	$	0.11

					Six Months Ended March 31,
					2019		2018
Numerator:
Net income (loss) attributable to common stockholders of IES Holdings, Inc.					$	12,348	$	(27,304	)
Decrease in noncontrolling interest						—		(44	)
Net income (loss) attributable to restricted stockholders of IES Holdings, Inc.						25		—

Net income (loss) attributable to IES Holdings, Inc.					$	12,373	$	(27,348	)

Denominator:
Weighted average common shares outstanding — basic						21,187,834		21,189,641
Effect of dilutive stock options andnon-vested restricted stock						236,688		—

Weighted average common and common equivalent shares outstanding — diluted						21,424,522		21,189,641

Earnings (loss) per share attributable to IES Holdings, Inc.:
Basic					$	0.58	$	(1.29	)
Diluted					$	0.58	$	(1.29	)

IES HOLDINGS, INC.

Notes to the Condensed Consolidated Financial Statements

(All Amounts in Thousands Except Share Amounts)

(Unaudited)

   Nine Months Ended June 30,
   2018    2017
Numerator:

Net income (loss) attributable to common shareholders of IES Holdings, Inc.
   $ (18,788 )    $ 10,195
Decrease in noncontrolling interest
   (44 )    —
Net income attributable to restricted shareholders of IES Holdings, Inc.
   —      81




Net income (loss) attributable to IES Holdings, Inc.
   $ (18,832 )    $ 10,276




Denominator:

Weighted average common shares outstanding — basic
   21,193,306    21,295,254
Effect of dilutive stock options andnon-vested restricted stock
   —      255,550




Weighted average common and common equivalent shares
outstanding — diluted
   21,193,306    21,550,804




Earnings (loss) per share attributable to IES Holdings, Inc.:

Basic
   $ (0.89 )    $ 0.48
Diluted
   $ (0.89 )    $ 0.48

When an entity has a net loss, it is prohibited from including potential common shares in the computation of diluted per share amounts. Accordingly, we have utilized basic shares outstanding to calculate both basic and diluted loss per share for the ~~nine~~six months ended ~~June 30,~~March 31, 2018. The number of potential anti-dilutive shares excluded from the calculation was ~~211,669 shares. For~~255,146 shares.For the three months ended ~~June 30,~~March 31, 2018, and the three and ~~nine~~six months ended ~~June 30, 2017,~~March 31, 2019, the average price of our common shares exceeded the exercise price of all of our outstanding options; therefore, all of our outstanding stock options were included in the computation of fully diluted earnings per share.

5.6. OPERATING SEGMENTS

We manage and measure performance of our business in four distinct operating segments: Commercial & Industrial, Communications, Infrastructure Solutions and Residential. These segments are reflective of how the Company’s Chief Operating Decision Maker (“CODM”) reviews operating results for the purpose 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, as well as support services, to our four operating segments. Management allocates certain shared costs between segments for selling, general and administrative expenses and depreciation expense.

Segment information for the three and ~~nine~~six months ended ~~June 30,~~March 31, 2019, and 2018 ~~and 2017~~ is as follows:


	Three Months Ended June 30, 2018
	Commercial &					Infrastructure										Three Months Ended March 31, 2019
	Industrial			Communications		Solutions		Residential		Corporate			Total			Commercial & Industrial			Communications			Infrastructure Solutions			Residential			Corporate			Total
Revenues	$	78,156		$	54,368	$	24,856	$	75,196	$	—		$	232,576		$	79,975		$	70,437		$	34,450		$	72,052		$	—		$	256,914
Cost of services		67,839			43,436		18,701		60,063		—			190,039			71,184			58,492			27,004			56,999			—			213,679

Gross profit		10,317			10,932		6,155		15,133		—			42,537			8,791			11,945			7,446			15,053			—			43,235
Selling, general and administrative		6,980			7,193		4,568		10,941		2,690			32,372			7,363			7,666			4,685			11,187			4,169			35,070
Contingent consideration		—			—		81		—		—			81			—			—			(149	)		—			—			(149	)
Loss (gain) on sale of assets		(6	)		—		1		—		—			(5	)		(1	)		—			101			(2	)		—			98

Operating income (loss)	$	3,343		$	3,739	$	1,505	$	4,192	$	(2,690	)	$	10,089		$	1,429		$	4,279		$	2,809		$	3,868		$	(4,169	)	$	8,216

Other data:
Depreciation and amortization expense	$	548		$	595	$	1,120	$	156	$	18		$	2,437		$	629		$	426		$	1,175		$	217		$	27		$	2,474
Capital expenditures	$	715		$	119	$	112	$	110	$	—		$	1,056		$	615		$	193		$	635		$	398		$	—		$	1,841
Total assets	$	86,012		$	67,270	$	102,233	$	52,500	$	87,948		$	395,963		$	77,898		$	91,960		$	114,739		$	55,417		$	77,257		$	417,271

																Three Months Ended March 31, 2018
																Commercial & Industrial			Communications			Infrastructure Solutions			Residential			Corporate			Total
Revenues																$	65,589		$	50,244		$	23,866		$	65,978		$	—		$	205,677
Cost of services																	59,068			40,892			18,842			53,035			—			171,837

Gross profit																	6,521			9,352			5,024			12,943			—			33,840
Selling, general and administrative																	6,849			6,201			4,637			9,688			2,272			29,647
Contingent consideration																	—			—			71			—			—			71
Loss (gain) on sale of assets																	(17	)		(8	)		6			(1	)		—			(20	)

Operating income (loss)																$	(311	)	$	3,159		$	310		$	3,256		$	(2,272	)	$	4,142

Other data:
Depreciation and amortization expense																$	527		$	219		$	1,140		$	155		$	20		$	2,061
Capital expenditures																$	413		$	398		$	205		$	108		$	—		$	1,124
Total assets																$	72,559		$	60,102		$	100,884		$	47,695		$	103,747		$	384,987

IES HOLDINGS, INC.

Notes to the Condensed Consolidated Financial Statements

(All Amounts in Thousands Except Share Amounts)

(Unaudited)


	Three Months Ended June 30, 2017
	Commercial &					Infrastructure											Six Months Ended March 31, 2019
	Industrial			Communications		Solutions			Residential		Corporate			Total			Commercial & Industrial			Communications			Infrastructure Solutions			Residential			Corporate			Total
Revenues	$	58,778		$	57,081	$	22,302		$	70,162	$	—		$	208,323		$	152,558		$	139,762		$	63,929		$	144,507		$	—		$	500,756
Cost of services		54,174			46,958		17,486			54,307		—			172,925			135,092			115,851			50,556			114,421			—			415,920

Gross profit		4,604			10,123		4,816			15,855		—			35,398			17,466			23,911			13,373			30,086			—			84,836
Selling, general and administrative		4,849			6,252		4,958			11,003		3,709			30,771			14,079			14,600			9,166			22,324			6,987			67,156
Contingent consideration		—			—		(33	)		—		—			(33	)		—			—			(115	)		—			—			(115	)
Loss (gain) on sale of assets		(4	)		—		(88	)		37		—			(55	)		(4	)		—			101			(2	)		—			95

Operating income (loss)	$	(241	)	$	3,871	$	(21	)	$	4,815	$	(3,709	)	$	4,715		$	3,391		$	9,311		$	4,221		$	7,764		$	(6,987	)	$	17,700

Other data:
Depreciation and amortization expense	$	329		$	187	$	1,785		$	135	$	70		$	2,506		$	1,255		$	841		$	2,269		$	426		$	55		$	4,846
Capital expenditures	$	283		$	328	$	124		$	170	$	—		$	905		$	1,467		$	693		$	822		$	845		$	102		$	3,929
Total assets	$	66,190		$	70,427	$	103,323		$	51,995	$	125,222		$	417,157		$	77,898		$	91,960		$	114,739		$	55,417		$	77,257		$	417,271

																	Six Months Ended March 31, 2018
																	Commercial & Industrial			Communications			Infrastructure Solutions			Residential			Corporate			Total
Revenues																	$	118,591		$	104,703		$	45,551		$	135,132		$	—		$	403,977
Cost of services																		107,227			86,231			35,842			107,773			—			337,073

Gross profit																		11,364			18,472			9,709			27,359			—			66,904
Selling, general and administrative																		12,644			12,285			9,194			20,054			5,559			59,736
Contingent consideration																		—			—			71			—			—			71
Loss (gain) on sale of assets																		(29	)		(9	)		5			(1	)		—			(34	)

Operating income (loss)																	$	(1,251	)	$	6,196		$	439		$	7,306		$	(5,559	)	$	7,131

Other data:
Depreciation and amortization expense																	$	1,084		$	435		$	2,383		$	296		$	71		$	4,269
Capital expenditures																	$	923		$	473		$	345		$	586		$	—		$	2,327
Total assets																	$	72,559		$	60,102		$	100,884		$	47,695		$	103,747		$	384,987

   Nine Months Ended June 30, 2018
   Commercial & Infrastructure
   Industrial Communications Solutions    Residential Corporate Total
Revenues
   $ 196,747 $ 159,071 $ 70,407    $ 210,328 $ —   $ 636,553
Cost of services
   175,066 129,667 54,543    167,836 —   527,112




Gross profit
   21,681 29,404 15,864    42,492 —   109,441
Selling, general and administrative
   19,624 19,478 13,762    30,995 8,249 92,108
Contingent consideration
   —   —   152    —   —   152
Loss (gain) on sale of assets
   (35 ) (9 ) 6    (1 ) —   (39 )




Operating income (loss)
   $ 2,092 $ 9,935 $ 1,944    $ 11,498 $ (8,249 ) $ 17,220




Other data:

Depreciation and amortization expense
   $ 1,632 $ 1,030 $ 3,503    $ 452 $ 89 $ 6,706
Capital expenditures
   $ 1,638 $ 592 $ 457    $ 696 $ —   $ 3,383
Total assets
   $ 86,012 $ 67,270 $ 102,233    $ 52,500 $ 87,948 $ 395,963

   Nine Months Ended June 30, 2017
   Commercial & Infrastructure
   Industrial Communications Solutions Residential    Corporate Total
Revenues
   $ 168,006 $ 172,058 $ 59,572 $ 204,527    $ —   $ 604,163
Cost of services
   154,628 144,668 45,103 157,370    —   501,769




Gross profit
   13,378 27,390 14,469 47,157    —   102,394
Selling, general and administrative
   14,434 18,086 13,280 32,488    10,797 89,085
Contingent consideration
   —   —   50 —      —   50
Gain on sale of assets
   (11 ) (1 ) (90 ) 34    —   (68 )




Operating income (loss)
   $ (1,045 ) $ 9,305 $ 1,229 $ 14,635    $ (10,797 ) $ 13,327




Other data:

Depreciation and amortization expense
   $ 983 $ 532 $ 4,730 $ 436    $ 203 $ 6,884
Capital expenditures
   $ 927 $ 1,888 $ 261 $ 517    $ 203 $ 3,796
Total assets
   $ 66,190 $ 70,427 $ 103,323 $ 51,995    $ 125,222 $ 417,157

~~IES HOLDINGS, INC.~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~(All Amounts in Thousands Except Share Amounts)~~

~~(Unaudited)~~

6.7. 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 ~~1,092,503~~847,891 shares were available for issuance at ~~June 30, 2018.~~March 31, 2019.

Stock Repurchase Program

~~Our~~In 2015, our Board of Directors ~~has~~ 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. 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 Rule10b5-1 trading plan, which allows repurchases underpre-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 or reinstated at any time at the Company’s discretion and without notice. We repurchased ~~20,810~~189,821 and ~~100,627~~235,954 shares, respectively, of our common stock during the

IES HOLDINGS, INC.

Notes to the Condensed Consolidated Financial Statements

(All Amounts in Thousands Except Share Amounts)

(Unaudited)

three and ~~nine~~six months ended ~~June 30,~~March 31, 2019, in open market transactions at an average price of $16.70 and $16.58, respectively, per share. We repurchased 79,817 shares of our common stock during the three and six months ended March 31, 2018, in open market transactions at an average price of ~~$15.45 and $15.41, respectively,~~$15.40 per share. ~~We repurchased 51,673~~On May 2, 2019, our Board of Directors authorized, subject to consent of the lenders under our credit facility, the repurchase of up to an additional 1.0 million shares of our common stock ~~during~~under the ~~three and nine months ended June 30, 2017, in open market transactions at an average price of $15.68 per share.~~stock repurchase program.

Treasury Stock

During the ~~nine~~six months ended ~~June 30, 2018,~~March 31, 2019, we issued 212,688 shares of common stock from treasury stock to employees and repurchased ~~32,832~~87,609 shares of common stock from our employees to satisfy ~~minimum~~statutory tax withholding requirements upon the vesting of ~~restricted~~certain performance phantom stock units under the Equity Incentive ~~Plan and~~Plan. We also repurchased ~~100,627~~235,954 shares of common stock on the open market pursuant to our stock repurchase program. We issued 3,991 shares of treasury stock as payment for outstanding phantom stock units that vested upon the departure of the Company’s President and issued 283,195 shares out of treasury stock for restricted shares granted upon the appointment of the Company’s Chief Executive Officer (“CEO”) in March 2019.

During the ~~nine~~six months ended ~~June 30,~~March 31, 2018, we repurchased 79,817 shares of common stock on the open market pursuant to the repurchase program. During the six months ended March 31, 2018, we issued 520 unrestricted shares of common stock from treasury stock to members of our Board of Directors as part of their overall compensation and 1,500 unrestricted shares of common stock to satisfy the exercise of outstanding ~~options.~~

During the nine months ended June 30, 2017, we repurchased 4,575 shares of common stock from our employees to satisfy minimum tax withholding requirements upon the vesting of restricted stock issued under the Equity Incentive Plan and repurchased 51,673 shares of common stock on the open market pursuant to our stock repurchase program. During the nine months ended June 30, 2017, we issued 1,545 unrestricted shares of common stock from treasury stock to members of our Board of Directors as part of their overall compensation and 32,250 unrestricted shares to satisfy the exercise of outstanding options.options for employees.

Restricted Stock

On March 4, 2019, we granted 283,195 restricted shares, pursuant to four award agreements, in conjunction with the appointment of the Company’s CEO. These awards include restricted shares subject to the achievement of specified levels of cumulative net income before taxes or specified stock price levels, as well as shares that vest based on the passage of time. During the three months ended ~~June 30,~~March 31, 2019, and 2018, ~~and 2017,~~ we recognized ~~$11~~$111 and ~~$133,~~$131, respectively, in compensation expense related to our restricted stock awards. During the ~~nine~~six months ended ~~June 30,~~March 31, 2019, and 2018, ~~and 2017,~~ we recognized ~~$256~~$111 and ~~$406,~~$245, respectively, in compensation expense related to our restricted stock awards. At ~~June 30, 2018,~~March 31, 2019, the unamortized compensation cost related to outstanding unvested restricted stock was ~~zero.~~

~~Performance Based Phantom Cash Units~~

Performance based phantom cash units (“PPCUs”) are a contractual right to a cash payment of $20 per PPCU. The PPCUs will generally become vested, if at all, upon achievement of certain specified performance objectives. During the three months ended June 30, 2018, and 2017, we recognized compensation expense of zero and $59, respectively, related to these units. During the nine months ended June 30, 2018, and 2017, we recognized compensation expense of zero and $252, respectively, related to these units.

~~IES HOLDINGS, INC.~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~(All Amounts in Thousands Except Share Amounts)~~

~~(Unaudited)~~

$3,685.

Phantom Stock Units

~~Phantom~~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 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. During the three months ended ~~June 30,~~March 31, 2019, and 2018, ~~and 2017,~~ we recognized ~~$49~~$50 and ~~$41,~~$49, respectively, in compensation expense related to these grants. During the ~~nine~~six months ended ~~June 30,~~March 31, 2019, and 2018, ~~and 2017,~~ we recognized ~~$140~~$99 and ~~$125,~~$91, respectively, in compensation expense related to these grants.

Performance Based Phantom Stock Units

A performance based phantom stock unit (a “PPSU”) is a contractual right to receive one share of the Company’s common stock upon the achievement of certain specified performance objectives and continued performance of services. On February 6, 2019, the Company granted an additional 230,274 PPSUs, of which 59,924 shares were subsequently forfeited in conjunction with the departure of the Company’s President. At ~~June 30, 2018,~~March 31, 2019, the Company had outstanding an aggregate of ~~399,027 three-year~~170,350 PPSUs. ~~The vesting of these awards is subject to the achievement of specified levels of cumulative net income before taxes or specified stock price levels and continued performance of services throughmid-December~~ ~~2018. At June 30, 2018, redemption of a portion of the awards is deemed probable.~~

During the three and ~~nine~~six months ended ~~June 30,~~March 31, 2019, we recognized compensation expense of $465 related to these grants. During the three and six months ended March 31, 2018, we recognized a benefit to compensation expense of ~~$343~~$652 and ~~$792,~~$449, respectively, related to these grants. This benefit ~~is a~~was the result of a reduction in the estimated number of units deemed probable of vesting based on the projected achievement of specified performance objectives. ~~During the three and nine months ended June 30, 2017, we recognized compensation expense of $225 and $753, respectively, related to these grants.~~

7.8. SECURITIES AND EQUITY INVESTMENTS

Our financial instruments consist of cash and cash equivalents, accounts receivable, notes receivable, investments, accounts payable and a loan agreement. We believe that the carrying value of these financial instruments in the accompanying Condensed Consolidated Balance Sheets approximates their fair value due to their short-term nature. ~~Additionally,~~At March 31, 2019, and September 30, 2018, we ~~have~~carried a cost method investment ~~in EnerTech Capital Partners II L.P. (“EnerTech”). We estimate the fair value of~~at $408 and $558, respectively, which is equal to our ~~investment in EnerTech (Level 3) using cash flow projections and market multiples of the underlyingnon-public~~ ~~companies.~~cost less impairment.

~~Investment in EnerTech~~

~~The following table presents the reconciliation of the carrying value~~21

IES HOLDINGS, INC.

Notes to the ~~fair value of the investment~~Condensed Consolidated Financial Statements

(All Amounts in ~~EnerTech as of June 30, 2018, and September 30, 2017:~~Thousands Except Share Amounts)

(Unaudited)

   June 30,
2018    September 30,
2017
Carrying value
   $ 558    $ 558
Unrealized gains
   170    171




Fair value
   $ 728    $ 729

At each reporting date, the Company performs an evaluation of impairment for securities to determine if any unrealized losses are other-than temporary. Based on the results of this evaluation, we believe the unrealized gain at June 30, 2018, and September 30, 2017, indicated our investment was not impaired.

8.9. EMPLOYEE BENEFIT PLANS

401(k) Plan

~~The Company offers~~In November 1998, we established the IES Holdings, Inc. 401(k) Retirement Savings Plan. All full-time IES employees ~~the opportunity~~and full-time employees of participating subsidiaries are eligible to participate on the first day of the month subsequent to completing sixty days of service and attaining agetwenty-one. Participants become vested in ~~its 401(k)~~our matching contributions following three years of service. We also maintain several subsidiary retirement savings plans. During the three months ended ~~June 30,~~March 31, 2019, and 2018, ~~and 2017,~~ we recognized ~~$466~~$600 and ~~$312,~~$485, respectively, in matching expense. During the ~~nine~~six months ended ~~June 30,~~March 31, 2019, and 2018, ~~and 2017,~~ we recognized ~~$1,380~~$1,023 and ~~$771,~~$914, respectively, in matching expense.

Post Retirement Benefit Plans

Certain individuals at one of the Company’s locations are entitled to receive fixed annual payments pursuant to post retirement benefit plans. We had an unfunded benefit liability of $718 and $755 recorded as of ~~June~~March 31, 2019, and September 30, 2018, ~~and $815 as of September 30, 2017,~~respectively, related to such plans.

~~IES HOLDINGS, INC.~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~(All Amounts in Thousands Except Share Amounts)~~

~~(Unaudited)~~

9.10. FAIR VALUE MEASUREMENTS

Fair Value Measurement Accounting

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 the asset or liability is (1) 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. Considerable 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 ~~June 30, 2018,~~March 31, 2019, financial assets and liabilities measured at fair value on a recurring basis were limited to our Executive Deferred Compensation 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 and liabilities measured at fair value on a recurring basis as of ~~June 30, 2018,~~March 31, 2019, and September 30, ~~2017,~~2018, are summarized in the following tables by the type of inputs applicable to the fair value measurements:


	June 30, 2018									March 31, 2019
	Total Fair Value			Quoted Prices (Level 1)			Significant Unobservable Inputs (Level 3)			Total Fair Value			Quoted Prices (Level 1)			Significant Unobservable Inputs (Level 3)
Executive savings plan assets	$	713		$	713		$	—		$	738		$	738		$	—
Executive savings plan liabilities		(599	)		(599	)		—			(623	)		(623	)		—
Contingent consideration		(795	)		—			(795	)		(270	)		—			(270	)

Total	$	(681	)	$	114		$	(795	)	$	(155	)	$	115		$	(270	)


										September 30, 2018
										Total Fair Value			Quoted Prices (Level 1)			Significant Unobservable Inputs (Level 3)
Executive savings plan assets										$	747		$	747		$	—
Executive savings plan liabilities											(631	)		(631	)		—
Contingent consideration											(680	)		—			(680	)

Total										$	(564	)	$	116		$	(680	)

   September 30, 2017
   Total Fair Value    Quoted Prices
(Level 1)    Significant
Unobservable
Inputs (Level 3)
Executive savings plan assets
   $ 641    $ 641    $ —
Executive savings plan liabilities
   (529 )    (529 )    —
Contingent consideration
   (786 )    —      (786 )






Total
   $ (674 )    $ 112    $ (786 )

In fiscal years 2016 and 2017, we entered into contingent consideration arrangements related to certain acquisitions. Please see Note 13, “Business Combinations” for further discussion. At June 30, 2018, we estimated the fair value of these contingent consideration liabilities at $795. The table below presents a reconciliation of the fair value of these obligations, which used significant unobservable inputs (Level 3).22

IES HOLDINGS, INC.

Notes to the Condensed Consolidated Financial Statements

(All Amounts in Thousands Except Share Amounts)

(Unaudited)

   Contingent
Consideration
Agreements
Fair value at September 30, 2017
   $ 786
Issuances
   248
Settlements
   (391 )
Net adjustments to fair value
   152


Fair value at June 30, 2018
   $ 795

~~10.~~In fiscal years 2016, 2017 and 2018, we entered into contingent consideration arrangements related to certain acquisitions. At March 31, 2019, we estimated the fair value of these contingent consideration liabilities at $270. The table below presents a reconciliation of the fair value of these obligations, which used significant unobservable inputs (Level 3).


	Contingent Consideration Agreements
Fair value at September 30, 2018	$	680
Settlements		(295	)
Net adjustments to fair value		(115	)

Fair value at March 31, 2019	$	270

11. INVENTORY

Inventories consist of the following components:


	June 30, 2018		September 30, 2017		March 31, 2019		September 30, 2018
Raw materials	$	4,175	$	4,104	$	4,368	$	4,453
Work in process		4,396		3,731		5,972		5,168
Finished goods		1,608		1,692		2,218		1,746
Parts and supplies		8,538		7,396		11,171		9,599

Total inventories	$	18,717	$	16,923	$	23,729	$	20,966

~~11.~~12. GOODWILL AND INTANGIBLE ASSETS

Goodwill

The following is a progression of goodwill by segment for the ~~nine~~six months ended ~~June 30, 2018:~~March 31, 2019:

   Commercial &
Industrial    Communications    Infrastructure
Solutions    Residential    Total
Goodwill at September 30, 2017
   $ 7,176    $ —      $ 30,886    $ 8,631    $ 46,693
Acquisitions (See Note 13)
   —      2,561    —      —      2,561
Adjustments
   —      —      45    —      45










Goodwill at June 30, 2018
   $ 7,176    $ 2,561    $ 30,931    $ 8,631    $ 49,299

~~Intangible Assets~~

~~Intangible assets consist of the following:~~


	Commercial & Industrial		Communications		Infrastructure Solutions			Residential		Total
Goodwill at September 30, 2018	$	6,976	$	2,816	$	30,931		$	9,979	$	50,702
Divestitures (See Note 14)		—		—		(119	)		—		(119	)
Adjustments		—		—		—			39		39

Goodwill at March 31, 2019	$	6,976	$	2,816	$	30,812		$	10,018	$	50,622

      June 30, 2018
   Estimated
Useful Lives
(in Years)    Gross Carrying
Amount    Accumulated
Amortization    Net
Trademarks/trade names
   5 - 20    $ 5,044    $ 723    $ 4,321
Technical library
   20    400    96    304
Customer relationships
   6 -15    33,469    7,027    26,442
Backlog
   1    3,026    2,565    461
Construction contracts
   1    2,583    2,375    208






Total intangible assets
      $ 44,522    $ 12,786    $ 31,736

IES HOLDINGS, INC.

Notes to the Condensed Consolidated Financial Statements

(All Amounts in Thousands Except Share Amounts)

(Unaudited)

      September 30, 2017
   Estimated
Useful Lives
(in Years)    Gross Carrying
Amount    Accumulated
Amortization    Net
Trademarks/trade names
   5 - 20    $ 4,643    $ 440    $ 4,203
Technical library
   20    400    81    319
Customer relationships
   6 - 15    31,115    4,741    26,374
Backlog
   1    2,412    2,130    282
Construction contracts
   1    2,399    2,164    235






Total intangible assets
      $ 40,969    $ 9,556    $ 31,413

~~12.~~Intangible Assets

Intangible assets consist of the following:


	Estimated Useful Lives (in Years)		March 31, 2019
	Estimated Useful Lives (in Years)		Gross Carrying Amount		Accumulated Amortization		Net
Trademarks/trade names		5 - 20	$	5,084	$	1,053	$	4,031
Technical library		20		400		111		289
Customer relationships		6 - 15		33,539		9,460		24,079
Non-competition arrangements		5		40		5		35
Backlog		1		378		358		20
Construction contracts		1		2,184		2,179		5

Total intangible assets			$	41,625	$	13,166	$	28,459


	Estimated Useful Lives (in Years)		September 30, 2018
	Estimated Useful Lives (in Years)		Gross Carrying Amount		Accumulated Amortization		Net
Trademarks/trade names		5 - 20	$	5,084	$	831	$	4,253
Technical library		20		400		101		299
Customer relationships		6 - 15		33,539		7,870		25,669
Non-competition arrangements		5		40		1		39
Backlog		1		378		176		202
Construction contracts		1		2,184		2,056		128

Total intangible assets			$	41,625	$	11,035	$	30,590

13. 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.

~~The following is a discussion of our significant legal matters:~~

~~Capstone Construction Claims~~

From 2003 to 2005, two of our former subsidiaries performed HVAC and electrical work under contract with Capstone Building Corporation (“Capstone”) on a university student housing project in Texas. In 2005, our subsidiaries filed for arbitration against Capstone, seeking payment for work performed, change orders and other impacts. The parties settled those claims, and the release included a waiver of warranties associated with any of the HVAC work. Several years later, the subsidiaries discontinued operations, and the Company sold their assets.

On October 24, 2013, Capstone filed a petition in the 12th Judicial District Court of Walker County, Texas against these subsidiaries, among other subcontractors, seeking contribution, defense, indemnity and damages for breach of contract in connection with alleged construction defect claims brought against Capstone by the owner of the student housing project. The owner claimed $10,406 in damages, plus attorneys’ fees and costs against Capstone, which Capstone sought to recover from the subcontractors. The claims against the Company were based on alleged defects in the mechanical design, construction and installation of the HVAC and electrical systems performed by our former subsidiaries.

Following mediation in June and November 2017, the Company reached an agreement in late December 2017 to settle all claims brought against it. In the nine months ended June 30, 2018, a mutual settlement and release agreement was executed by the plaintiffs and the Company resulting in a charge and payment by the Company of $200.

~~USAMRIID Claim~~

~~On December 6, 2017, IES Commercial, Inc. filed suit in the United States District Court of Maryland in the matter~~~~USA for the use and benefit of IES Commercial, Inc. and IES Commercial, Inc. v. Manhattan Construction Co., Torcon, Inc., Manhattan Torcon A Joint Venture, Federal Ins. Co., Fidelity~~ ~~& Deposit Co. of Maryland, Zurich American Ins. Co., and Travelers Casualty~~ ~~& Surety Co~~. This suit relates to a large project which has been ongoing since 2009 and was scheduled for completion in early 2013. As the Company has previously disclosed, the Company entered into a subcontract in 2009 with Manhattan Torcon A Joint Venture to perform subcontracting services at the U.S. Army Medical Research Institute for Infectious Diseases (“USAMRIID”) replacement facility project for a contract value of approximately $61,146, subject to additions or deductions. Because of delays on the project and additional work the Company performed, the Company has sought approximately $21,000 for claims incurred as of August 31, 2017, and expects to seek an additional approximate $4,500 for claims the Company expects to incur from August 31, 2017, through completion of the project. On January 22, 2018, the defendants in this matter filed a motion to dismiss the suit, and on February 2, 2018, we filed our response. We are awaiting a decision on this matter.

~~IES HOLDINGS, INC.~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~(All Amounts in Thousands Except Share Amounts)~~

~~(Unaudited)~~

Given the uncertainty litigation poses, the Company has not recorded any recovery in connection with this claim. There can be no assurance that the Company will prevail in this litigation matter or that, if the Company does prevail, it will not receive a significantly lower award.

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 insureds 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 ~~June 30, 2018,~~March 31, 2019, and September 30, ~~2017,~~2018, we had ~~$6,856~~$6,021 and ~~$6,204,~~$6,202, respectively, accrued for self-insurance liabilities. We are also subject to construction defect liabilities, primarily within our Residential segment. As of ~~June 30, 2018,~~March 31, 2019, and September 30, ~~2017,~~2018, we had ~~$179~~$87 and ~~$218,~~$171, respectively, reserved for these claims. Because the reserves 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 or that the timing of payments will not create liquidity issues for the Company.

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 ~~June 30, 2018,~~March 31, 2019, and September 30, ~~2017, $6,420~~2018, $6,351 and ~~$5,985,~~$6,101, respectively, of our outstanding letters of credit was utilized to collateralize our insurance program.

IES HOLDINGS, INC.

Notes to the Condensed Consolidated Financial Statements

(All Amounts in Thousands Except Share Amounts)

(Unaudited)

Surety

As of ~~June 30, 2018,~~March 31, 2019, the estimated cost to complete our bonded projects was approximately ~~$61,325.~~$77,025. 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 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. At ~~both June 30, 2018,~~March 31, 2019, and September 30, ~~2017,~~2018, $200 and $508, respectively, of our outstanding letters of credit were to collateralize our vendors.

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 ~~June 30, 2018,~~March 31, 2019, we had no such commitments.

~~13.~~14. BUSINESS COMBINATIONS AND DIVESTITURES

~~2018~~

~~The Company completed one acquisition in~~In March 2019, our management committed to a plan for the ~~nine months ended June 30, 2018, for a total consideration~~sale of $6,179, which includes cash consideration paid at close of $5,806, cash consideration remaining to be paid of $125, and contingent consideration payable in July 2019 and 2020 with aggregate acquisition date fair value estimated at of $248.

~~IES HOLDINGS, INC.~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~(All Amounts in Thousands Except Share Amounts)~~

~~(Unaudited)~~

~~Azimuth Communications, Inc. (“Azimuth”) – On April 6, 2018, the Company acquired~~substantially all of the ~~outstanding capital stock~~operating assets at one of Azimuth, a Portland, Oregon-based provider of design and integration services for structured cabling, physical security, access control systems, distributed antenna systems, wireless access, and audio visual systems. Azimuth operatesour operating facilities within the ~~Company’s Communications~~Infrastructure Solutions segment. ~~The acquisition~~In connection with the plan, we allocated $119 of ~~Azimuth has accelerated~~goodwill to the disposal group. In conjunction with the write down of these assets to their net realizable value of $450, we recognized a loss of $101, recorded within “Loss (gain) on sale of assets” within our ~~expansion into~~Condensed Consolidated Statements of Comprehensive Income for the ~~Pacific Northwest market, which~~three and six months ended March 31, 2019. We expect the ~~Company believes~~sale of these assets to a third party to be ~~an attractive market.~~

~~2017~~

~~The Company~~ completed ~~three acquisitions in~~within the fiscal year ended September 30, ~~2017, for a total aggregate consideration of $20,979. See Note 18, “Business Combinations and Divestitures” in our Annual Report on Form10-K~~ ~~for the year ended September 30, 2017, for~~2019.

~~further information.~~

Freeman Enclosure Systems, LLC (“Freeman”) – We acquired 100% of the membership interests and associated real estate of Freeman and its affiliate Strategic Edge LLC on March 16, 2017. Strategic Edge LLC was subsequently merged into Freeman, with Freeman as the surviving entity. Freeman is included in our Infrastructure Solutions segment. Freeman’s ability to manufacture custom generator enclosures has expanded our solutions offering.

Technical Services II, LLC (“Technical Services”) – STR Mechanical, our 80% owned subsidiary which is consolidated, acquired all of the membership interests of Technical Services, a Chesapeake, Virginia-based provider of mechanical maintenance services, including commercial heating, ventilation and air conditioning, food service equipment, electrical and plumbing services, on June 15, 2017. Technical Services operates as a subsidiary of STR Mechanical within the Company’s Commercial & Industrial segment. The acquisition of Technical Services has expanded our geographic reach and diversified our customer base for mechanical maintenance services.

NEXT Electric, LLC (“NEXT”) – On July 14, 2017, the Company acquired 80% of the membership interests of NEXT Electric, a Milwaukee, Wisconsin-based electrical contractor specializing in the design, installation and maintenance of electrical systems for commercial, industrial, healthcare, water treatment and education end markets. NEXT Electric operates within the Company’s Commercial & Industrial segment.

The total purchase consideration for the Freeman, Technical Services and Azimuth acquisitions included contingent consideration payments based on the acquired company’s earnings, as defined in the applicable purchase and sale agreement. The fair value of the total contingent consideration liability for all acquisitions, including Freeman and Technical Services, was estimated at $795 at June 30, 2018, and is included in other current liabilities and other~~non-current~~ ~~liabilities on our Condensed Consolidated Balance Sheets.~~

The Company accounted for the transactions under the acquisition method of accounting, which requires recording assets and liabilities at fair value (Level 3). The valuations derived from estimated fair value assessments and assumptions used by management are preliminary pending finalization of certain tangible and intangible asset valuations and assessment of deferred taxes. While management believes that its preliminary estimates and assumptions underlying the valuations are reasonable, different estimates and assumptions could result in different values being assigned to individual assets acquired and liabilities assumed. This may result in adjustments to the preliminary amounts recorded. The preliminary estimates for Freeman, Technical Services and NEXT Electric were finalized during the nine months ended June 30, 2018. The preliminary valuation of the assets and liabilities assumed as of the acquisition of Azimuth is as follows:

Current assets
   $ 1,765
Property and equipment
   355
Intangible assets (primarily customer relationships)
   3,439
Goodwill
   2,561
Current liabilities
   (1,154 )
Long term liabilities
   (14 )
Deferred tax liability
   (773 )


Net assets acquired
   $ 6,179

With regard to goodwill, the balance is attributable to the workforce of the acquired business and other intangibles that do not qualify for separate recognition. In connection with the Azimuth acquisition, we acquired goodwill of $2,561, of which $59 is tax deductible.

~~IES HOLDINGS, INC.~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~(All Amounts in Thousands Except Share Amounts)~~

~~(Unaudited)~~

~~The Azimuth acquisition contributed $2,474 in additional revenue and $284 in operating loss during the three and nine months ended June 30, 2018.~~

~~Unaudited Pro Forma Information~~

The following unaudited supplemental pro forma results of operations, calculated as if each acquisition occurred as of October 1 of the fiscal year prior to consummation, for the three and nine months ended June 30, 2018, and 2017, are as follows:

   Unaudited
   Three Months Ended June 30,
   2018    2017
Revenues
   $ 232,576    $ 220,088
Net income attributable to IES Holdings, Inc.
   $ 8,577    $ 5,252

   Unaudited
   Nine Months Ended June 30,
   2018    2017
Revenues
   $ 642,167    $ 654,251
Net income (loss) attributable to IES Holdings, Inc.
   $ (19,452 )    $ 8,498

~~14.~~15. SUBSEQUENT EVENTS

On ~~July 23, 2018, we entered into~~May 2, 2019, our Board of Directors authorized, subject to consent of the ~~Third Amendment~~lenders under our credit facility, the repurchase of up to an additional 1.0 million shares of our ~~Second Amended and Restated Credit and Security Agreement (as amended,~~common stock under the ~~“Credit Agreement”). See Note 3, “Debt” for further discussion.~~stock repurchase program.

Item 2.

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 Form10-K for the year ended September 30, ~~2017,~~2018, and the Condensed Consolidated Financial Statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form10-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 Form10-Q.

OVERVIEW

Executive Overview

Please refer to Part 1, Item 1. “Business”of our Annual Report on Form10-K for the year ended September 30, ~~2017,~~2018, for a discussion of the Company’s services and corporate strategy. IES Holdings, Inc., a Delaware corporation, is a holding company that owns and manages operating subsidiaries, comprised of providers of industrial products and infrastructure services, to a variety of end markets. Our operations are currently organized into four principal business segments: Commercial & Industrial, Communications, Infrastructure Solutions and Residential.

RESULTS OF OPERATIONS

We report our operating results across our four operating segments: Commercial & Industrial, Communications, Infrastructure Solutions and Residential. Expenses associated with our corporate office are classified separately. The following ~~tables present~~table presents selected historical results of operations of IES Holdings, Inc., as well as the results of acquired businesses from the dates acquired.


	Three Months Ended June 30,												Three Months Ended March 31,
	2018						2017						2019						2018
	$			%			$			%			$			%			$			%
	(Dollars in thousands, Percentage of revenues)												(Dollars in thousands, Percentage of revenues)
Revenues	$	232,576			100.0	%	$	208,323			100.0	%	$	256,914			100.0	%	$	205,677			100.0	%
Cost of services		190,039			81.7	%		172,925			83.0	%		213,679			83.2	%		171,837			83.5	%

Gross profit		42,537			18.3	%		35,398			17.0	%		43,235			16.8	%		33,840			16.5	%
Selling, general and administrative expenses		32,372			13.9	%		30,771			14.8	%		35,070			13.7	%		29,647			14.4	%
Contingent consideration		81			0.0	%		(33	)		0.0	%		(149	)		(0.1	)%		71			0.0	%
Gain on sale of assets		(5	)		0.0	%		(55	)		0.0	%
Loss (gain) on sale of assets														98			0.0	%		(20	)		0.0	%

Operating income		10,089			4.3	%		4,715			2.2	%		8,216			3.2	%		4,142			2.0	%

Interest and other (income) expense, net		402			0.2	%		361			0.1	%		423			0.2	%		430			0.2	%

Income from operations before income taxes		9,687			4.2	%		4,354			2.1	%		7,793			3.0	%		3,712			1.8	%
Provision for income taxes		1,038			0.4	%		(1,519	)		(0.7	)%		2,336			0.9	%		1,425			0.7	%

Net income		8,649			3.7	%		5,873			2.8	%		5,457			2.1	%		2,287			1.1	%

Net income attributable to noncontrolling interest		(133	)		(0.1	)%		(5	)		0.0	%
Net loss (income) attributable to noncontrolling interest														32			0.0	%		(66	)		0.0	%

Comprehensive income attributable to IES Holdings, Inc.	$	8,516			3.7	%	$	5,868			2.8	%
Net income attributable to IES Holdings, Inc.													$	5,489			2.1	%	$	2,221			1.1	%

Consolidated revenues for the three months ended ~~June 30, 2018,~~March 31, 2019, were ~~$24.3~~$51.2 million higher than for the three months ended ~~June 30, 2017,~~March 31, 2018, an increase of ~~11.6%~~24.9%, with increases at all of our Commercial & Industrial, Infrastructure Solutions and Residential segments. Revenues at our businesses acquired in fiscal 2017 and 2018 contributed $17.3 million to the revenue increase, partly offsetsegments, driven by ~~a $6.3 million decrease at two underperforming branches within our Commercial & Industrial segment, which are in the process of winding down operations.~~strong demand.

Consolidated gross profit for the three months ended ~~June 30, 2018,~~March 31, 2019, increased ~~$7.1~~$9.4 million compared with the three months ended ~~June 30, 2017.~~March 31, 2018. Our overall gross profit percentage increased to ~~18.3%~~16.8% during the three months ended ~~June 30, 2018,~~March 31, 2019, as compared to ~~17.0%~~16.5% during the three months ended ~~June 30, 2017.~~March 31, 2018. Gross profit as a percentage of revenue increased at all of our segments, with the exception of our ~~Residential~~Communications segment.

Selling, general and administrative expenses include costs not directly associated with performing work for our customers. These costs consist primarily of compensation and benefits related to corporate, segment and branch management (including incentive-based

compensation), occupancy and utilities, training, professional services, information technology costs, consulting fees, travel and certain types of depreciation and amortization. We allocate certain corporate selling, general and administrative costs across our segments as we believe this more accurately reflects the costs associated with operating each segment.

During the three months ended ~~June 30, 2018,~~March 31, 2019, our selling, general and administrative expenses were ~~$32.4~~$35.1 million, an increase of ~~$1.6~~$5.4 million, or ~~5.2%~~18.3%, over the three months ended ~~June 30, 2017. Selling,~~March 31, 2018, driven by increased personnel costs at our operating segments in connection with their growth. This increase also includes a $1.9 million increase in expenses at the corporate level, related to a severance payment to our outgoing President, as well as an increase in stock based compensation expenses. However, selling, general and administrative expense as a percent of revenue decreased from ~~14.8%~~14.4% for the three months ended ~~June 30, 2017,~~March 31, 2018, to ~~13.9%~~13.7% for the three months ended ~~June 30, 2018. This decrease was primarily attributable to lower variable compensation and incentive costs. Businesses acquired during fiscal 2017 and 2018 contributed an additional $1.9 million for~~March 31, 2019, as we benefitted from the ~~three months June 30, 2018.~~increased scale of our operations.


	Nine Months Ended June 30,												Six Months Ended March 31,
	2018						2017						2019						2018
	$			%			$			%			$			%			$			%
	(Dollars in thousands, Percentage of revenues)												(Dollars in thousands, Percentage of revenues)
Revenues	$	636,553			100.0	%	$	604,163			100.0	%	$	500,756			100.0	%	$	403,977			100.0	%
Cost of services		527,112			82.8	%		501,769			83.1	%		415,920			83.1	%		337,073			83.4	%

Gross profit		109,441			17.2	%		102,394			16.9	%		84,836			16.9	%		66,904			16.6	%
Selling, general and administrative expenses		92,108			14.5	%		89,085			14.7	%		67,156			13.4	%		59,736			14.8	%
Contingent consideration		152			0.0	%		50			0.0	%		(115	)		0.0	%		71			0.0	%
Gain on sale of assets		(39	)		0.0	%		(68	)		0.0	%
Loss (gain) on sale of assets														95			0.0	%		(34	)		0.0	%

Operating income		17,220			2.7	%		13,327			2.2	%		17,700			3.5	%		7,131			1.8	%

Interest and other (income) expense, net		1,175			0.2	%		1,187			0.2	%		1,017			0.2	%		773			0.2	%

Income from operations before income taxes		16,045			2.5	%		12,140			2.0	%		16,683			3.3	%		6,358			1.6	%
Provision for income taxes⁽¹⁾		34,622			5.4	%		1,792			0.3	%		4,243			0.8	%		33,584			8.3	%

Net income (loss)		(18,577	)		(2.9	)%		10,348			1.7	%		12,440			2.5	%		(27,226	)		(6.7	)%

Net income attributable to noncontrolling interest		(255	)		0.0	%		(72	)		0.0	%		(67	)		0.0	%		(122	)		0.0	%

Comprehensive income (loss) attributable to IES Holdings, Inc.	$	(18,832	)		(3.0	)%	$	10,276			1.7	%
Net income (loss) attributable to IES Holdings, Inc.													$	12,373			2.5	%	$	(27,348	)		(6.8	)%

(1)	2018 includes a charge of $31.5 million tore-measure our net deferred tax assets in connection with the Tax Cuts and Jobs Act.

Consolidated revenues for the ~~nine~~six months ended ~~June 30, 2018~~March 31, 2019, were ~~$32.4~~$96.8 million higher than for the ~~nine~~six months ended ~~June 30, 2017,~~March 31, 2018, an increase of ~~5.4%~~24.0%, with increases at all of our operating segments, with the exception of our Communications segment. Revenues from our businesses acquired in fiscal 2017 and 2018 contributed $44.6 million of the revenue increase for the nine months ended June 30, 2018, largely offsetdriven by ~~a $19.0 million decrease in revenue at the Denver and Roanoke branches of our Commercial & Industrial segment, which are in the process of winding down operations.~~strong demand.

Our overall gross profit percentage increased to ~~17.2%~~16.9% during the ~~nine~~six months ended ~~June 30, 2018,~~March 31, 2019, as compared to ~~16.9%~~16.6% during the ~~nine~~six months ended ~~June 30, 2017. Businesses acquired in fiscal 2017 and 2018, contributed an additional $5.9 million~~March 31, 2018. Gross profit as a percentage of gross profit for the nine months ended June 30, 2018, as compared with the nine months ended June 30, 2017. However, this increase was largely offset by a decrease in margin associated with higher materials costs inrevenue increased at our Residential ~~segment.~~and Commercial & Industrial segments, while decreasing slightly at our Communications and Infrastructure Solutions segments.

During the ~~nine~~six months ended ~~June 30, 2018,~~March 31, 2019, our selling, general and administrative expenses were ~~$92.1~~$67.2 million, an increase of ~~$3.0~~$7.4 million, or ~~3.4%~~12.4%, over the ~~nine~~six months ended ~~June 30, 2017.~~March 31, 2018, driven by increased personnel costs at our operating segments in connection with their growth. This increase ~~was primarily attributable~~also includes a $1.4 million increase in expenses at the corporate level, related to a severance payment to our outgoing President, as well as an increase in stock-based compensation expense. However, selling, general and administrative expense ~~incurred at businesses acquired during fiscal 2017 and 2018, which contributed $4.9 million~~as a percent of ~~the increase~~revenue decreased from 14.8% for the ~~nine~~three months ended ~~June 30, 2018. This increase was partly offset by a reduction in variable compensation expense.~~March 31, 2018, to 13.4% for the three months ended March 31, 2019, as we benefitted from the increased scale of our operations.

Commercial & Industrial


	Three Months Ended June 30,												Three Months Ended March 31,
	2018						2017						2019						2018
	$			%			$			%			$			%			$			%
	(Dollars in thousands, Percentage of revenues)												(Dollars in thousands, Percentage of revenues)
Revenue	$	78,156			100.0	%	$	58,778			100.0	%
Revenues													$	79,975			100.0	%	$	65,589			100.0	%
Cost of services		67,839			86.8	%		54,174			92.2	%		71,184			89.0	%		59,068			90.1	%

Gross profit		10,317			13.2	%		4,604			7.8	%		8,791			11.0	%		6,521			9.9	%
Selling, general and administrative expenses		6,980			8.9	%		4,849			8.2	%		7,363			9.2	%		6,849			10.4	%
Gain on sale of assets		(6	)		0.0	%		(2	)		0.0	%		(1	)		0.0	%		(17	)		0.0	%

Operating income		3,343			4.3	%		(243	)		-0.4	%		1,429			1.8	%		(311	)		-0.5	%

Revenue.Revenues in our Commercial & Industrial segment increased ~~$19.4~~$14.4 million, or ~~33.0%~~21.9%, during the three months ended ~~June 30, 2018,~~March 31, 2019, compared to the three months ended ~~June 30, 2017.~~March 31, 2018. The increase was largely driven by revenues at businesses acquired in the third and fourth quarters of fiscal 2017, which contributed an additional $13.5 million during the three months ended June 30, 2018, compared to the three months ended June 30, 2017. Additionally, increased bid volume at several of our branches and improving market conditions in certain ~~areas also contributed to the overall increase in revenues.~~areas. These increases were partly offset by a ~~$6.3~~$3.8 million decrease relating to our ~~Denver and Roanoke branches, which are in the process of winding down operations.~~decision to exit certain markets. The market for this segment’s services remains highly competitive.

Gross Profit. Our Commercial & Industrial segment’s gross profit during the three months ended ~~June 30, 2018,~~March 31, 2019, increased by ~~$5.7~~$2.3 million, as compared to the three months ended ~~June 30, 2017.~~March 31, 2018. The increase is due to ~~both~~improved efficiency across the ~~$1.5 million reduction in losses at~~branches, as we improved project execution and as our ~~Denver and Roanoke branches, which are in the process~~ability to absorb fixed costs benefitted from higher volumes. Gross margin as a percent of ~~winding down operations, and $1.8 million of additional gross profit contributed by our fiscal 2017 acquisitions~~revenue increased 1.1% to 11.0% during the three months ended ~~June 30, 2018,~~March 31, 2019, as compared to the three months ended ~~June 30, 2017. Improved efficiency across other branches drove the remaining increase.~~March 31, 2018.

Selling, General and Administrative Expenses. Our Commercial & Industrial segment’s selling, general and administrative expenses during the three months ended ~~June 30, 2018,~~March 31, 2019, increased ~~$2.1~~$0.5 million, or ~~44.0%~~7.5%, compared to the three months ended ~~June 30, 2017.~~March 31, 2018. Selling, general and administrative expenses as a percentage of revenues ~~increased 0.7%~~decreased 1.2% to ~~8.9%~~9.2% during the three months ended ~~June 30, 2018,~~March 31, 2019, compared to the three months ended ~~June 30, 2017.~~March 31, 2018. The increase relates primarily to ~~our fiscal 2017 acquisitions, which increased expense by $1.2 million. The remaining increase is driven by~~ costs associated with ~~additional management oversight, as well as~~ higher incentive compensation ~~cost~~ in connection with improved profitability.

The following table summarizes the results of our Denver and Roanoke branches, which are in the process of winding down operations. These results are included in the consolidated Commercial & Industrial results shown above:

Denver and Roanoke branches    Three Months Ended June 30,
   2018    2017
   (In thousands)
Revenues
   $ 1,261    $ 7,575
Cost of services
   1,792    9,548
Selling, general and administrative expenses
   379    635




Operating loss
   $ (910 )    $ (2,608 )

   Nine Months Ended June 30,
   2018 2017
   $    % $    %
   (Dollars in thousands, Percentage of revenues)
Revenue
   $ 196,747    100.0 % $ 168,006    100.0 %
Cost of services
   175,066    89.0 % 154,628    92.0 %






Gross profit
   21,681    11.0 % 13,378    8.0 %
Selling, general and administrative expenses
   19,624    10.0 % 14,434    8.6 %
Gain on sale of assets
   (35 )    0.0 % (11 )    0.0 %






Operating income
   2,092    1.1 % (1,045 )    -0.6 %


	Six Months Ended March 31,
	2019						2018
	$			%			$			%
	(Dollars in thousands, Percentage of revenues)
Revenues	$	152,558			100.0	%	$	118,591			100.0	%
Cost of services		135,092			88.6	%		107,227			90.4	%

Gross profit		17,466			11.4	%		11,364			9.6	%
Selling, general and administrative expenses		14,079			9.2	%		12,644			10.7	%
Gain on sale of assets		(4	)		0.0	%		(29	)		0.0	%

Operating income		3,391			2.2	%		(1,251	)		-1.1	%

Revenue.Revenues in our Commercial & Industrial segment increased ~~$28.7~~$34.0 million during the ~~nine~~six months ended ~~June 30, 2018,~~March 31, 2019, an increase of ~~17.1%~~28.6% compared to the ~~nine~~six months ended ~~June 30, 2017.~~March 31, 2018. The increase in revenue over this period was driven by our fiscal 2017 acquisitions, which contributed $33.1 million of additional revenue during the nine months ended June 30, 2018 compared to the nine months ended June 30, 2017. This increase in revenue was partly offset by a $19.0 million decrease in revenue attributable to the winding down of operations at our Denver and Roanoke locations for the nine months ended June 30, 2018, as compared with the nine months ended June 30, 2017. Additionally, increased bid volume at several of our branches and improving market conditions in certain ~~areas also contributed to the overall~~areas. This increase in ~~revenues.~~revenue was partly offset by a $6.7 million decrease in revenue attributable to our decision to exit the Denver and Roanoke markets. The market for this segment’s services in many geographic regions remains highly competitive.

Gross Profit. Our Commercial & Industrial segment’s gross profit during the ~~nine~~six months ended ~~June 30, 2018,~~March 31, 2019, increased by ~~$8.3~~$6.1 million, or ~~62.0%~~53.7%, as compared to the ~~nine~~six months ended ~~June 30, 2017.~~March 31, 2018. As a percentage of revenue, gross profit increased from ~~8.0%~~9.6% for the ~~nine~~six months ended ~~June 30, 2017,~~March 31, 2018, to ~~11.0%~~11.4% for the ~~nine~~six months ended ~~June 30, 2018.~~March 31, 2019. The increase ~~was driven by $4.9 million of additional gross profit contributed by~~is due to improved efficiency across the branches, as we improved project execution and as our ~~fiscal 2017 acquisitions during the nine months ended June 30, 2018, compared~~ability to the nine months ended June 30, 2017. Additionally, for the nine months ended June 30, 2018, gross margin improved by $3.6 million compared with the nine months ended June 30, 2017 at our Denver and Roanoke branches, which are in the process of winding down operations.absorb fixed costs benefitted from higher volumes.

Selling, General and Administrative Expenses.Our Commercial & Industrial segment’s selling, general and administrative expenses during the ~~nine~~six months ended ~~June 30, 2018,~~March 31, 2019, increased ~~$5.2~~$1.4 million, or ~~36.0%~~11.3%, compared to the ~~nine~~six months ended ~~June 30, 2017, and increased 1.4%~~March 31, 2018, but decreased 1.5% as a percentage of revenue. The increase was driven by our fiscal 2017 acquisitions, where selling, general and administrative expense for the nine months ended June 30, 2018, increased by $3.3 million. The remaining increase relates primarily to employee expensecosts associated with ~~management hired to provide additional oversight at the regional and branch levels.~~

~~The following table summarizes the results of our Denver and Roanoke branches, which are~~higher incentive compensation in ~~the process of winding down operations. These results are included in the consolidated Commercial & Industrial segment results shown above:~~connection with improved profitability.

Denver and Roanoke branches    Nine Months Ended June 30,
   2018    2017
   (In thousands)
Revenues
   $ 8,371    $ 27,376
Cost of services
   9,096    31,633
Selling, general and administrative expenses
   1,322    2,098




Operating loss
   $ (2,047 )    $ (6,355 )

Communications


	Three Months Ended June 30,										Three Months Ended March 31,
	2018					2017					2019					2018
	$		%			$		%			$		%			$			%
	(Dollars in thousands, Percentage of revenues)										(Dollars in thousands, Percentage of revenues)
Revenue	$	54,368		100.0	%	$	57,081		100.0	%
Revenues											$	70,437		100.0	%	$	50,244			100.0	%
Cost of services		43,436		79.9	%		46,958		82.3	%		58,492		83.0	%		40,892			81.4	%

Gross profit		10,932		20.1	%		10,123		17.7	%		11,945		17.0	%		9,352			18.6	%
Selling, general and administrative expenses		7,193		13.2	%		6,252		11.0	%		7,666		10.9	%		6,201			12.3	%
Gain on sale of assets												—		0.0	%		(8	)		0.0	%

Operating income		3,739		6.9	%		3,871		6.8	%		4,279		6.1	%		3,159			6.3	%

Revenue.Our Communications segment’s revenues ~~decreased~~increased by ~~$2.7~~$20.2 million during the three months ended ~~June 30, 2018, primarily as a result of the timing of capital spending by certain of our data center customers. These decreases were partly offset by $2.5 million from Azimuth, which we acquired in~~March 31, 2019, or 40.2%, during the three months ended ~~June 30,~~March 31, 2019, compared to the three months ended March 31, 2018. The increase primarily resulted from increased demand driven by several of our large data center customers. Revenues in our Communications segment can vary from quarter to quarter based on the capital spending cycles of our customers.

Gross Profit.Our Communications segment’s gross profit during the three months ended ~~June 30, 2018,~~March 31, 2019, increased by ~~$0.8~~$2.6 million compared to the three months ended ~~June 30, 2017. Gross~~March 31, 2018. While total gross profit increased in connection with higher volumes, gross profit as a percentage of revenue ~~increased 2.4% to 20.1%~~decreased, as we took on a larger proportion of cost-plus arrangements. These arrangements provide us with a reimbursement for ~~the three months ended June 30, 2018, primarily~~our costs plus a markup, and are typically lower margin, but also lower risk, as ~~a result of improved project execution.~~compared with our fixed-cost arrangements.

Selling, General and Administrative Expenses. Our Communications segment’s selling, general and administrative expenses increased

by ~~$0.9~~$1.5 million, or ~~15.0%~~23.6%, during the three months ended ~~June 30, 2018,~~March 31, 2019, compared to the three months ended ~~June 30, 2017.~~March 31, 2018. The increase is a result of higher personnel cost, particularly related to continuing investment to support the growth of the business, along with higher incentive compensation expense in connection with improved profitability and cash flows. Selling, general and administrative expenses as a percentage of revenues in the Communications segment ~~increased 2.2%~~decreased 1.4% to ~~13.2%~~10.9% of segment revenue during the three months ended ~~June 30, 2018,~~March 31, 2019, compared to the three months ended ~~June 30, 2017. The increase is a result~~March 31, 2018, as we benefitted from the increased scale of higher personnel cost, particularly related to higher incentive compensation expense in connection with improved profitability and cash flows, as well as continuing investment to support anticipated growth.our operations.


	Nine Months Ended June 30,												Six Months Ended March 31,
	2018						2017						2019					2018
	$			%			$			%			$		%			$			%
	(Dollars in thousands, Percentage of revenues)												(Dollars in thousands, Percentage of revenues)
Revenue	$	159,071			100.0	%	$	172,058			100.0	%
Revenues													$	139,762		100.0	%	$	104,703			100.0	%
Cost of services		129,667			81.5	%		144,668			84.1	%		115,851		82.9	%		86,231			82.4	%

Gross profit		29,404			18.5	%		27,390			15.9	%		23,911		17.1	%		18,472			17.6	%
Selling, general and administrative expenses		19,478			12.2	%		18,086			10.5	%		14,600		10.4	%		12,285			11.7	%
Gain on sale of assets		(9	)		0.0	%		(1	)		0.0	%		—		0.0	%		(9	)		0.0	%

Operating income		9,935			6.2	%		9,305			5.4	%		9,311		6.7	%		6,196			5.9	%

Revenue.Our Communications segment revenues ~~decreased~~increased by ~~$13.0~~$35.1 million during the ~~nine~~six months ended ~~June 30, 2018, primarily as a result of $7.9 million of revenue we received in~~March 31, 2019, or 33.5% compared to the ~~nine~~six months ended June 30, 2017 on a large system upgrade project for a school district. This project was completed in fiscal 2017. Our revenues for the nine months ended June 30, 2018 were also affected by the timing of capital spending by certainMarch 31, 2018. The increase primarily resulted from increased demand from several of our data center customers. Revenues in our Communications segment can vary from quarter to quarter based on the capital spending cycles of our customers.

Gross Profit.Our Communications segment’s gross profit during the ~~nine~~six months ended ~~June 30, 2018,~~March 31, 2019, increased ~~$2.0~~$5.4 million, or ~~7.4%~~29.4%, as compared to the ~~nine~~six months ended ~~June 30, 2017. Gross~~March 31, 2018. While total gross profit increased in connection with higher volumes, gross profit as a percentage of revenue ~~increased 2.6% to 18.5%~~decreased, as we took on a larger proportion of cost-plus arrangements. These arrangements provide us with a reimbursement for ~~the nine months ended June 30, 2018. The increase is driven primarily by improved project execution.~~our costs plus a markup, and are typically lower margin, but also lower risk, as compared with our fixed-cost arrangements.

Selling, General and Administrative Expenses. Our Communications segment’s selling, general and administrative expenses increased ~~$1.4~~$2.3 million, or ~~7.7%~~18.8%, during the ~~nine~~six months ended ~~June 30, 2018,~~March 31, 2019, compared to the ~~nine~~six months ended ~~June 30, 2017.~~March 31, 2018. The increase is a result of higher personnel cost, particularly related to continuing investment to support the growth of the business, along with higher incentive compensation expense in connection with improved profitability and cash flows. Selling, general and administrative expenses as a percentage of revenues in the Communications segment ~~increased~~decreased by ~~1.7%~~1.3% to ~~12.2%~~10.4% of segment revenue during the ~~nine~~six months ended ~~June 30, 2018,~~March 31, 2019, compared to the ~~nine~~six months ended ~~June 30, 2017,~~March 31, 2018, as ~~a result~~we benefitted from the increased scale of ~~the decrease in revenue, as well as continuing investment to support anticipated growth.~~our operations.

Infrastructure Solutions


	Three Months Ended June 30,											Three Months Ended March 31,
	2018					2017						2019						2018
	$		%			$			%			$			%			$		%
	(Dollars in thousands, Percentage of revenues)											(Dollars in thousands, Percentage of revenues)
Revenue	$	24,856		100.0	%	$	22,302			100.0	%
Revenues												$	34,450			100.0	%	$	23,866		100.0	%
Cost of services		18,701		75.2	%		17,486			78.4	%		27,004			78.4	%		18,842		78.9	%

Gross profit		6,155		24.8	%		4,816			21.6	%		7,446			21.6	%		5,024		21.1	%
Selling, general and administrative expenses		4,568		18.4	%		4,958			22.2	%		4,685			13.6	%		4,637		19.4	%
Contingent consideration		81		0.3	%		(33	)		-0.1	%		(149	)		-0.4	%		71		0.3	%
Loss (gain) on sale of assets		1		0.0	%		(88	)		-0.4	%
Loss on sale of assets													101			0.3	%		6		0.0	%

Operating income (loss)		1,505		6.1	%		(21	)		-0.1	%
Operating income													2,809			8.2	%		310		1.3	%

Revenue.Revenues in our Infrastructure Solutions segment increased ~~$2.6~~$10.6 million during the three months ended ~~June 30, 2018,~~March 31, 2019, an increase of ~~11.5%~~44.3% compared to the three months ended ~~June 30, 2017.~~March 31, 2018. The increase in revenue was driven primarily by ~~additional revenue of $1.3 million contributed~~our bus duct and enclosure business, driven by ~~the acquisition of Freeman Enclosures in the second quarter of fiscal 2017,~~increased demand for enclosures to be used at data centers, as well as ~~a $1.0 million~~an increase in revenue atfrom our ~~Technibus facility.~~motor repair business.

Gross Profit. Our Infrastructure Solutions segment’s gross profit during the three months ended ~~June 30, 2018,~~March 31, 2019, increased ~~$1.3~~$2.4 million as compared to the three months ended ~~June 30, 2017.~~March 31, 2018. Gross profit as a percentage of revenue increased ~~3.2%~~0.5% to ~~24.8%~~21.6%. The primary driver of the improvement in margins was our bus duct facility, which was ~~affected~~impacted in the prior year by production inefficiencies and

~~by the impact of~~ the amortization of contract intangibles associated with the acquisition of this business in 2016. Margins are also affected by the mix of work performed.

Selling, General and Administrative Expenses.Our Infrastructure Solutions segment’s selling, general and administrative expenses during the three months ended ~~June 30, 2018, decreased $0.4 million~~March 31, 2019, remained flat compared to the three months ended ~~June 30, 2017. This decrease was the result of a $0.5 million decrease in amortization expense related~~March 31, 2018, as we were able to ~~intangible assets recorded in connection with the acquisitions of Freeman~~scale our business effectively without adding general and ~~Technibus.~~administrative expense.


	Nine Months Ended June 30,											Six Months Ended March 31,
	2018					2017						2019						2018
	$		%			$			%			$			%			$		%
	(Dollars in thousands, Percentage of revenues)											(Dollars in thousands, Percentage of revenues)
Revenue	$	70,407		100.0	%	$	59,572			100.0	%
Revenues												$	63,929			100.0	%	$	45,551		100.0	%
Cost of services		54,543		77.5	%		45,103			75.7	%		50,556			79.1	%		35,842		78.7	%

Gross profit		15,864		22.5	%		14,469			24.3	%		13,373			20.9	%		9,709		21.3	%
Selling, general and administrative expenses		13,762		19.5	%		13,280			22.3	%		9,166			14.3	%		9,194		20.2	%
Contingent consideration		152		0.2	%		50			0.1	%		(115	)		-0.2	%		71		0.2	%
Loss (gain) on sale of assets		6		0.0	%		(90	)		-0.2	%
Loss on sale of assets													101			0.2	%		5		0.0	%

Operating income		1,944		2.8	%		1,229			2.1	%		4,221			6.6	%		439		1.0	%

Revenue.Revenues in our Infrastructure Solutions segment increased ~~$10.8~~$18.4 million during the ~~nine~~six months ended ~~June 30, 2018,~~March 31, 2019, an increase of ~~18.2%~~40.3% compared to the ~~nine~~six months ended ~~June 30, 2017.~~March 31, 2018. The increase ~~was~~in revenue relates primarily to our bus duct and enclosure business, driven by ~~$9.0 million of additional revenue contributed by Freeman Enclosures, which we acquired during the second quarter of fiscal 2017. A $3.6 million~~increased demand for enclosures to be used at data centers, as well as an increase ~~in revenues from the manufacture of bus duct was offset by a decrease~~ in revenue from our motor repair ~~business, which remains highly dependent on the steel industry.~~business.

Gross Profit. Our Infrastructure Solutions segment’s gross profit during the ~~nine~~six months ended ~~June 30, 2018,~~March 31, 2019, increased ~~$1.4~~$3.7 million as compared to the ~~nine~~six months ended ~~June 30, 2017.~~March 31, 2018. The primary driver of the improvement in margins was our bus duct facility, which was affected in the prior year by production inefficiencies and by the impact of the amortization of contract intangibles associated with the acquisition of this business in 2016. We also benefitted from higher volumes in our generator enclosure manufacturing facility, as well as increased activity at our motor repair shops. Gross profit as a percentage of revenues decreased ~~1.8%~~0.4% to ~~22.5%~~20.9% for the ~~nine~~six months ended ~~June 30, 2018. Margins improved year over year at both our bus duct manufacturing business and our motor repair business. However, our overall gross margin was affected by~~March 31, 2019, largely as the result of a change in the mix of work ~~performed, as lower margin work at Freeman represented a larger percentage of our total revenues.~~performed.

Selling, General and Administrative Expenses.Our Infrastructure Solutions segment’s selling, general and administrative expenses during the ~~nine~~six months ended ~~June 30, 2018, increased $0.5 million~~March 31, 2019 remained flat compared to the ~~nine~~six months ended ~~June 30, 2017. The increase was primarily the result of a $0.5 million increase in~~March 31, 2018, as we were able to scale our business effectively without adding general and administrative costs incurred at Freeman Enclosures, which was acquired during the second quarter of fiscal 2017, as well as $0.5 million in additional selling and administrative costs in support of growth of the business. These increases were partly offset by a decrease in intangible amortization expense related to the acquisition of Technibus in 2016.expense.

Residential

   Three Months Ended June 30,
   2018 2017
   $    % $    %
   (Dollars in thousands, Percentage of revenues)
Revenue
   $ 75,196    100.0 % $ 70,162    100.0 %
Cost of services
   60,063    79.9 % 54,307    77.4 %






Gross profit
   15,133    20.1 % 15,855    22.6 %
Selling, general and administrative expenses
   10,941    14.5 % 11,003    15.7 %
Gain on sale of assets
   0    0.0 % 37    0.1 %






Operating income
   4,192    5.6 % 4,815    6.9 %


	Three Months Ended March 31,
	2019						2018
	$			%			$			%
	(Dollars in thousands, Percentage of revenues)
Revenues	$	72,052			100.0	%	$	65,978			100.0	%
Cost of services		56,999			79.1	%		53,035			80.4	%

Gross profit		15,053			20.9	%		12,943			19.6	%
Selling, general and administrative expenses		11,187			15.5	%		9,688			14.7	%
Gain on sale of assets		(2	)		0.0	%		(1	)		0.0	%

Operating income		3,868			5.4	%		3,256			4.9	%

Revenue.Our Residential segment’s revenues increased by ~~$5.0~~$6.1 million during the three months ended ~~June 30, 2018,~~March 31, 2019, an increase of ~~7.2%~~9.2% as compared to the three months ended ~~June 30, 2017.~~March 31, 2018. The increase is driven by our single-family business, where revenues increased by ~~$10.0~~$7.9 million for the three months ended ~~June 30, 2018,~~March 31, 2019, compared with the three months ended ~~June 30, 2017.~~March 31, 2018. This was partly offset by an $0.8 million decrease in our multi-family business, where many projects have been delayed by weather. Service ~~and solar~~ revenues ~~increased~~also decreased by ~~$1.3~~$1.0 million for the three months ended ~~June 30, 2018,~~March 31, 2019, compared with the same period in the prior year. These increases were partly offset by a $6.2 million decrease in our multi-family business. The quarter ended June 30, 2017, benefitted from a historically high level of backlog, which was the result of project delays in the previous fiscal year. Our current multi-family backlog has returned to a more typical level.

Gross Profit.During the three months ended ~~June 30, 2018,~~March 31, 2019, our Residential segment experienced a ~~$0.7~~$2.1 million, or ~~4.6%~~16.3%, ~~decrease~~increase in gross profit as compared to the three months ended ~~June 30, 2017.~~March 31, 2018. The ~~decrease~~increase in gross profit was driven primarily by ~~an increase in copper and other commodity prices, as we experienced favorable~~improved commodity prices in the quarter ended ~~June 30, 2017, as well as an increase in labor costs, as a result of tightening labor markets.~~March 31, 2019. Gross margin as a percentage of revenue ~~decreased 2.5%~~increased 1.3% to ~~20.1%~~20.9% during the quarter ended ~~June 30, 2018,~~March 31, 2019, as compared with the quarter ended ~~June 30, 2017.~~March 31, 2018.

Selling, General and Administrative Expenses. Our Residential segment experienced a ~~$0.1~~$1.5 million, or ~~0.6%~~15.5%, ~~decrease~~increase in selling, general and administrative expenses during the three months ended ~~June 30, 2018,~~March 31, 2019, compared to the three months ended ~~June 30, 2017,~~March 31, 2018, primarily as a result of ~~lower~~higher incentive compensation expense in connection with ~~lower~~higher profitability. Selling, general and administrative expenses as a percentage of revenues in the Residential segment ~~decreased~~increased to ~~14.5%~~15.5% of segment revenue during the three months ended ~~June 30, 2018,~~March 31, 2019, compared to ~~15.7%~~14.7% in the three months ended ~~June 30, 2017.~~March 31, 2018.


		Nine Months Ended June 30,											Six Months Ended March 31,
		2018						2017					2019						2018
	��	$			%			$		%			$			%			$			%
		(Dollars in thousands, Percentage of revenues)											(Dollars in thousands, Percentage of revenues)
Revenue		$	210,328			100.0	%	$	204,527		100.0	%
Revenues													$	144,507			100.0	%	$	135,132			100.0	%
Cost of services			167,836			79.8	%		157,370		76.9	%		114,421			79.2	%		107,773			79.8	%

Gross profit			42,492			20.2	%		47,157		23.1	%		30,086			20.8	%		27,359			20.2	%
Selling, general and administrative expenses			30,995			14.7	%		32,488		15.9	%		22,324			15.4	%		20,054			14.8	%
Gain on sale of assets			(1	)		0.0	%		34		0.0	%		(2	)		0.0	%		(1	)		0.0	%

Operating income			11,498			5.5	%		14,635		7.2	%		7,764			5.4	%		7,306			5.4	%

Revenue.Our Residential segment revenues increased by ~~$5.8~~$9.4 million during the ~~nine~~six months ended ~~June 30, 2018,~~March 31, 2019, an increase of ~~2.8%~~6.9% as compared to the ~~nine~~six months ended ~~June 30, 2017.~~March 31, 2018. The increase is driven by our single-family business, where revenues increased by ~~$19.3 million for the nine months ended June 30, 2018, compared with the nine months ended June 30, 2017. Service and solar revenues also increased by $3.4~~$13.8 million for the six months ended ~~June 30, 2018,~~March 31, 2019, compared with the six months ended March 31, 2018. This was partly offset by a $3.0 million decrease in our multi-family business, where many projects have been delayed by weather. Service revenues also decreased by $1.4 million for the six months ended March 31, 2019, compared with the same period in the prior year. These increases were partly offset by a decrease in multi-family revenues, which declined by $16.9 million. The nine months ended June 30, 2017, benefitted from a historically high level of backlog, which was the result of project delays in the previous fiscal year. Our current multi-family backlog has returned to a more typical level.

Gross Profit. During the ~~nine~~six months ended ~~June 30, 2018,~~March 31, 2019, our Residential segment experienced a ~~$4.7~~$2.7 million, or ~~9.9%~~10.0%, ~~decrease~~increase in gross profit as compared to the ~~nine~~six months ended ~~June 30, 2017.~~March 31, 2018. The ~~decrease~~increase in gross profit was driven primarily by ~~an increase in~~improved copper and other commodity ~~prices, as we experienced favorable commodity prices in the nine months ended June 30, 2017, as well as an increase in labor costs, as a result of tightening labor markets.~~prices. Gross margin as a percentage of revenue ~~decreased 2.9%~~increased 0.6% to ~~20.2%~~20.8% during the six months ended ~~June 30, 2018,~~March 31, 2019, as compared with the six months ended ~~June 30, 2017.~~March 31, 2018.

Selling, General and Administrative Expenses. Our Residential segment experienced a ~~$1.5~~$2.3 million, or ~~4.6%~~11.3%, ~~decrease~~increase in selling, general and administrative expenses during the ~~nine~~six months ended ~~June 30, 2018,~~March 31, 2019, compared to the ~~nine~~six months ended ~~June 30, 2017,~~March 31, 2018, driven by ~~decreased~~increased compensation expense, primarily as a result of a decrease of $2.9 million in variable compensation and incentive costs associated with decreased profitability, partly offset by an increase in salary and travel costs.expense. Selling, general and administrative expenses as a percentage of revenues in the Residential segment ~~decreased~~increased by ~~1.2%~~0.6% to ~~14.7%~~15.4% of segment revenue during the ~~nine~~six months ended ~~June 30, 2018.~~March 31, 2019.

INTEREST AND OTHER EXPENSE, NET


	Three Months Ended June 30,						Three Months Ended March 31,
	2018			2017			2019			2018
	(In thousands)						(In thousands)
Interest expense	$	441		$	351		$	456		$	402
Deferred financing charges		72			56			79			71

Total interest expense		513			407			535			473
Other (income) expense, net		(111	)		(46	)		(112	)		(43	)

Total interest and other expense, net	$	402		$	361		$	423		$	430

During the three months ended ~~June 30, 2018,~~March 31, 2019, we incurred interest expense of $0.5 million primarily comprised of interest expense from our ~~term loan~~revolving credit facility with Wells Fargo Bank, N.A. (“Wells Fargo”), an average letter of credit balance of ~~$6.8~~$6.6 million under our revolving credit facility and an average unused line of credit balance of ~~$62.9 million.~~$66.6 million under our revolving credit facility. This compares to interest expense of ~~$0.4~~$0.5 million for the three months ended ~~June 30, 2017,~~March 31, 2018, primarily comprised of interest expense from our revolving credit facility, an average letter of credit balance of ~~$6.5~~$6.4 million under our revolving credit facility and an average unused line of credit balance of ~~$60.2 million.~~$63.4 million under our revolving credit facility.


	Nine Months Ended June 30,						Six Months Ended March 31,
	2018			2017			2019			2018
	(In thousands)						(In thousands)
Interest expense	$	1,213		$	1,052		$	926		$	772
Deferred financing charges		214			229			156			142

Total interest expense		1,427			1,281			1,082			914
Other (income) expense, net		(252	)		(94	)		(65	)		(141	)

Total interest and other expense, net	$	1,175		$	1,187		$	1,017		$	773

During the ~~nine~~six months ended ~~June 30, 2018,~~March 31, 2019, we incurred interest expense of ~~$1.4~~$1.1 million primarily comprised of interest expense from our revolving credit facility, an average letter of credit balance of ~~$6.6~~$6.7 million under our revolving credit facility and an average unused line of credit balance of ~~$63.2 million.~~$64.8 million under our revolving credit facility. This compares to interest expense of ~~$1.3~~$0.9 million for the ~~nine~~six months ended ~~June 30, 2017,~~March 31, 2018, primarily comprised of interest expense from our revolving credit facility, an average letter of credit balance of ~~$6.6~~$6.4 million under our revolving credit facility and an average unused line of credit balance of ~~$42.1 million.~~$63.4 million under our revolving credit facility.

PROVISION FOR INCOME TAXES

We recorded income tax expense of ~~$1.0~~$2.3 million for the three months ended ~~June 30, 2018,~~March 31, 2019, compared to income tax ~~benefit~~expense of ~~$1.5~~$1.4 million ~~related to the reversal of an uncertain tax position~~ for the three months ended June 30, 2017. For the three months ended June 30, 2018 and 2017, our income tax expense was offset by benefits of $1.8 million and $3.7 million, respectively, associated with the reversal of reserves previously established for uncertain tax positions.

March 31, 2018. We recorded income tax expense of ~~$34.6~~$4.2 million for the ~~nine~~six months ended ~~June 30, 2018,~~March 31, 2019, compared to income tax expense of ~~$1.8~~$33.6 million for the six months ended June 30, 2017. For the nine months ended June 30, 2018 and 2017, our income tax expense was offset by benefits of $1.8 million and $3.7 million, respectively, associated with the reversal of reserves previously established for uncertain tax positions.March 31, 2018.

For the ~~nine~~six months ended ~~June 30,~~March 31, 2018, our income tax expense included a preliminary charge of $31.5 million tore-measure our deferred tax assets and liabilities to reflect the ~~estimated~~ impact of the new statutory tax rate enacted during the ~~quarter.~~six months ended March 31, 2018. The Company completed its accounting for the income tax effects of the Tax Cuts and Jobs Act and fully recorded the impact in the year ended September 30, 2018.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management’s discussion and analysis of financial condition and results of operations is based upon our Condensed Consolidated Financial Statements included in this report on Form10-Q, which have been prepared in accordance with U.S. generally accepted accounting ~~principles (“GAAP”).~~principles. 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 same 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.

BACKLOG


	March 31, 2019		December 31, 2018		September 30, 2018		June 30, 2018
Remaining performance obligations	$	424	$	407	$	326	$	289
Agreements without an enforceable obligation⁽¹⁾		149		131		156		103

Backlog	$	573	$	538	$	482	$	392

(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.

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, ~~authorizing the performance of future work,~~ 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 installation services for single-family housing at our Residential segment is completed on a short-term basis and is therefore excluded from backlog. In addition, certain service work is performed under master service agreements on anas-needed ~~basis.~~basis and is therefore excluded from backlog. Our backlog has increased from ~~$331~~$482 million at September 30, ~~2017,~~2018, to ~~$392~~$573 million at ~~June 30, 2018.~~March 31, 2019.

WORKING CAPITAL

During the ~~nine~~six months ended ~~June 30, 2018,~~March 31, 2019, working capital exclusive of cash increased by ~~$16.3~~$12.1 million from September 30, ~~2017,~~2018, reflecting a ~~$8.9~~$10.3 million increase in current assets excluding cash and a ~~$7.4~~$1.8 million decrease in current liabilities during the period.

During the ~~nine~~six months ended ~~June 30, 2018,~~March 31, 2019, our current assets exclusive of cash increased to ~~$212.3~~$246.8 million, as compared to ~~$203.5~~$236.4 million as of September 30, ~~2017.~~2018. The increase primarily relates to ~~an $9.1~~a $9.4 million increase in ~~Costs and estimated earnings in excess of billings, largely driven by our Commercial & Industrial segment.~~accounts receivable. Days sales outstanding decreased to 5360 at ~~June 30, 2018,~~March 31, 2019, from 6662 at September 30, ~~2017.~~2018. While the rate of collections may vary, our typically secured position, resulting from our ability in general to secure liens against our customers’ overdue receivables, offers some protection that collection will occur eventually to the extent that our security retains value.

During the ~~nine~~six months ended ~~June 30, 2018,~~March 31, 2019, our total current liabilities decreased by ~~$7.4~~$1.8 million to ~~$143.2~~$162.6 million, compared to ~~$150.6~~$164.4 million as of September 30, ~~2017,~~2018, primarily related to a decrease in both accounts payable and accrued liabilities and ~~a decrease in~~ Billings in excess of costs and estimated earnings.

Surety

We believe the bonding capacity presently provided by our sureties is adequate for our current operations and will be adequate for our operations for the foreseeable future. As of ~~June 30, 2018,~~March 31, 2019, the estimated cost to complete our bonded projects was approximately ~~$61.3~~$77.0 million.

LIQUIDITY AND CAPITAL RESOURCES

The Revolving Credit Facility

We maintain a $100 million revolving credit facility with Wells ~~Fargo Bank, N.A.~~Fargo. that matures in August 9, 2021, ~~(as amended, the “Credit Facility”),~~ pursuant to a Second Amended and Restated Credit and Security Agreement with Wells Fargo ~~Bank, N.A.,~~dated as of April 10, 2017, which was ~~further~~ amended on July 14, 2017, August 2, 2017, and July 23, 2018 (as amended, the “Amended Credit Agreement”).

~~Pursuant to the July 23, 2018 amendment, we are required to comply with the minimum EBITDA financial covenant of the~~The Amended Credit Agreement in a given quarter only if our Excess Availability (as defined in the Credit Agreement) in the immediately following quarter, as tested monthly during that quarter, falls below $30 million. If, in a subsequent quarter, Excess Availability levels return to or exceed the contractual threshold, then the Company will no longer be required to comply with the minimum EBITDA financial covenant, so long as Excess Availability remains above the threshold.

~~The Credit Facility~~ contains customary affirmative, negative and financial covenants as well as events of default.

As of ~~June 30, 2018,~~March 31, 2019, we were 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 (as defined in the Amended Credit Agreement) of at least thirty percent (30%) of the Maximum Revolver Amount (as defined in the Amended Credit Agreement), or $30 million; 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 ~~June 30, 2018,~~March 31, 2019, our Liquidity was ~~$68.9~~$87.9 million, our Excess Availability was ~~$47.2~~$71.7 million (or greater than 50% of minimum Liquidity), and our Fixed Charge Coverage Ratio was ~~6.1:~~6.0:1.0. AsBecause our Excess Availability at ~~June 30, 2018,~~March 31, 2019, exceeded $30 million, we were not required to ~~meet the~~comply with minimum EBITDA financial covenant of the Amended Credit Agreement, which would have required that we have a minimum EBITDA for the four quarters ended March 31, 2019, of $35 million. ~~However, our~~Our EBITDA, as defined in the Amended Credit Agreement for the four quarters ended ~~June 30, 2018,~~March 31, 2019, was ~~$38.2~~$48.2 million.

If in the future our Liquidity falls below $30 million (or Excess Availability falls below 50% or our minimum Liquidity), our Fixed Charge Coverage Ratio is less than 1.1:1.0, we fail to meet our minimum EBITDA requirement when it is required to be tested, 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 indebtedness becoming immediately due and payable.

At ~~June 30, 2018,~~March 31, 2019, we had ~~$6.9~~$6.6 million in outstanding letters of credit with Wells Fargo ~~Bank, N.A~~ and outstanding borrowings of ~~$30.2~~$20.2 million.

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.~~country; however a seasonal decline in working capital may be offset by needs associated with higher growth or acquisitions.

Operating activities provided net cash of ~~$5.0~~$9.4 million during the ~~nine~~six months ended ~~June 30, 2018,~~March 31, 2019, as compared to ~~$10.2~~$11.2 million of net cash provided in the ~~nine~~six months ended ~~June 30, 2017.~~March 31, 2018. The decrease in operating cash flow resulted primarily from an increase in working capital at our Commercial & Industrial and Infrastructure Solutions segments, in support of growth in these businesses.

Investing Activities

Net cash used in investing activities was ~~$9.3~~$3.9 million for the ~~nine~~six months ended ~~June 30, 2018,~~March 31, 2019, compared with ~~$18.2~~$2.4 million for the ~~nine~~six months ended ~~June 30, 2017.~~March 31, 2018. We used cash of ~~$3.4~~$3.9 million for purchases of fixed assets ~~and $6.0 million in connection with business combinations~~ in the ~~nine~~six months ended ~~June 30, 2018.~~March 31, 2019. For the ~~nine~~six months ended ~~June 30, 2017,~~March 31, 2018, we used ~~$3.8~~$2.3 million of cash for the purchase of fixed ~~assets and $14.7 million in conjunction with business combinations.~~assets.

Financing Activities

Net cash used in financing activities for the ~~nine~~six months ended ~~June 30, 2018~~March 31, 2019 was ~~$2.3~~$15.6 million, compared with $1.3 million in the ~~nine~~six months ended ~~June 30, 2017.~~March 31, 2018. For the ~~nine~~six months ended ~~June 30, 2018,~~March 31, 2019, we used ~~$2.1~~$10.0 million to repay a portion of our revolving credit facility. We also used $5.4 million to repurchase our shares to satisfy statutory withholding requirements upon the vesting of employee stock compensation, as well as in conjunction with our stock repurchase plan. ~~During~~For the ~~nine~~six months ended ~~June 30, 2017,~~March 31, 2018, we used ~~$0.9~~$1.2 million to repurchase our shares to satisfy statutory withholding requirements upon the vesting of employee stock compensation, as well as in ~~connection~~conjunction with our stock repurchase ~~plan, and $0.4 million to make contingent consideration payments.~~plan.

Stock Repurchase Program

Our Board of Directors has 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. 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 Rule10b5-1 trading plan, which allows repurchases underpre-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 or reinstated at any time at the Company’s discretion and without notice. We ~~purchased 100,627~~repurchased 235,954 shares pursuant to this program during the ~~nine~~six months ended ~~June 30, 2018.~~March 31, 2019. On May 2, 2019, our Board of Directors authorized, subject to consent of the lenders under our credit facility, the repurchase of up to an additional 1.0 million shares of our common stock under the stock repurchase program.

OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS

There have been no material changes in our contractual obligations and commitments from those disclosed in our Annual Report on Form10-K for the fiscal year ended September 30, ~~2017.~~2018.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Management is actively involved in monitoring exposure to market risk and continues to develop and utilize appropriate risk management techniques. Our exposure to significant market risks includes fluctuations in labor costs and commodity prices for copper, aluminum, steel and fuel. Commodity price risks may have an impact on our results of operations due to the fixed price nature of many of our contracts. We are also exposed to interest rate risk with respect to our outstanding debt obligations on the Amended Credit Agreement. For additional information see“Disclosure Regarding Forward-Looking Statements” in Part I of this Quarterly Report onForm 10-Q and our risk factors in Item 1A. “Risk Factors”in our Annual Report on Form10-K for the fiscal year ended September 30, ~~2017.~~2018.

Commodity Risk

Our exposure to significant market risks includes fluctuations in commodity prices for copper, aluminum, steel and fuel. Commodity price risks may have an impact on our results of operations due to the fixed nature of many of our contracts. Over the long-term, we expect to be able to pass along a portion of these costs to our customers, as market conditions in the construction industry will allow. The Company has not entered into any commodity price risk hedging instruments.

Interest Rate Risk

We are subject to interest rate risk on our floating interest rate borrowings on the Amended Credit Agreement. If LIBOR were to increase, our interest payment obligations on outstanding borrowings would increase, having a negative effect on our cash flow and financial condition. We currently do not maintain any hedging contracts that would limit our exposure to variable rates of interest when we have outstanding borrowings. Floating rate debt, where the interest rate fluctuates periodically, exposes us to short-term changes in market interest rates.

All of the long-term debt outstanding under our revolving credit facility is structured on floating interest rate terms. A one percentage point increase in the interest rates on our long-term debt outstanding under ~~the~~our revolving credit facility as of ~~June 30, 2018,~~March 31, 2019, would cause a ~~$0.3~~$0.2 millionpre-tax annual increase in interest expense.

Item 4.

Controls and Procedures

Changes in Internal Control Over Financial Reporting

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules13a-15 and15d-15 under the Securities Exchange ~~Act)~~Act of 1934, as amended (the “Exchange Act”)) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Disclosure Controls and Procedures

In accordance withRules 13a-15 and15d-15 of the ~~Securities~~ Exchange Act, ~~of 1934, as amended (the “Exchange Act”),~~ we carried out an evaluation, under the supervision and with the participation of management, including our ~~President~~Chief Executive Officer and our Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our ~~President~~Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of ~~June 30, 2018,~~March 31, 2019, to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Our disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our ~~President~~Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

For information regarding legal proceedings, see Note ~~12,~~13, “Commitments and Contingencies – Legal Matters” in the Notes to our Condensed Consolidated Financial Statements set forth in Part I, Item 1 of this Quarterly Report on Form10-Q, which is incorporated herein by reference.

Item 1A.

Risk Factors

There have been no material changes to the risk factors disclosed under Part 1, Item 1A. “Risk Factors”in our Annual Report on Form10-K for the fiscal year ended September 30, ~~2017.~~2018.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

The following table presents information with respect to purchases of common stock of the Company made during the three months ended ~~June 30, 2018:~~March 31, 2019:

Date
   Total Number
of Shares
Purchased (1)    Average
Price Paid
Per Share    Total Number of
Shares Purchased as
Part of a Publicly
Announced Plan (2)    Maximum Number of
Shares That May Yet
Be Purchased Under the
Publicly Announced
Plan as of June 30,
2018
April 1, 2018 - April 30, 2018
   49,262    $ 15.28    20,810    716,091








May 1, 2018 – May 31, 2018
   4,380    $ 17.50    —      716,091








June 1, 2018 – June 30, 2018
   —      —      —      716,091








Total
   53,642    $ 15.46    20,810    716,091


Date	Total Number of Shares Purchased (1)		Average Price Paid Per Share		Total Number of Shares Purchased as Part of a Publicly Announced Plan (2)		Maximum Number of Shares That May Yet Be Purchased Under the Publicly Announced Plan as of March 31, 2019
January 1, 2019 – January 31, 2019		147,617	$	16.61		147,617		531,054
February 1, 2019 – February 28, 2019		40,103	$	17.00		40,103		490,951
March 1, 2019 – March 31, 2019		3,722	$	17.65		2,101		488,850

Total		191,442	$	16.71		189,821		488,850

(1)

The total number of shares purchased includes shares purchased pursuant to the plan described in footnote (2) below. During the quarter ended ~~June 30, 2018, 32,832~~March 31, 2019, 1,621 shares were surrendered to the Company to satisfy tax withholding obligations in connection with the vesting of ~~restricted~~performance stock units issued to employees.

(2)

~~Our~~In 2015, our Board of Directors ~~has~~ authorized a stock repurchase program for the purchase of up to 1.5 million shares of the Company’s common stock from time to time. On May 2, 2019, our Board of Directors authorized, subject to consent of the lenders under our credit facility, the repurchase of up to an additional 1.0 million shares of the Company’s common stock under the stock repurchase program.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety Disclosures

None.

Item 5.

Other Information

None.

Item 6.

Exhibits


Exhibit No.		Description

~~2.1 —~~		Stock Purchase Agreement dated as of June 1, 2016, by and among IES Infrastructure Solutions, LLC, IES Holdings, Inc., Technibus, Inc. and Technibus, LLC. (Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form~~8-K~~ ~~filed on June 15, 2016)~~

3.1 —		Second Amended and Restated Certificate of Incorporation of IES Holdings, Inc., as amended by the Certificate of Amendment thereto, effective May 24, 2016 (composite). (Incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form10-Q filed on August 8, 2016)

3.2 —		Certificate of ~~Designations~~Designation of Series A Junior Participating Preferred Stock (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form8-K filed on January 28, 2013)

3.3 —		Amended and Restated Bylaws of IES Holdings, Inc., effective May 24, 2016. (Incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form8-K filed on May 24, 2016)


Exhibit No.		Description

4.1 —		Specimen common stock certificate. (Incorporated by reference to Exhibit 4.1 to the Company’s Annual Report onForm10-K filed on December 9, 2016)



4.2 —		Tax Benefit Protection Plan Agreement by and between IES Holdings, Inc. and American Stock Transfer & Trust Company, LLC, as Rights Agent, dated as of November 8, 2016, including the form of Rights Certificate and Summary of Stockholder Rights Plan attached thereto as Exhibits A and B, respectively. (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form8-K filed on November 9, 2016)

10.1 —		Third Amendment, dated as of July 23, 2018, to Second Amended and Restated Credit and Security Agreement, dated as of ~~July 23, 2018,~~April 10, 2017, by and among IES Holdings, Inc., each of the other Borrowers and Guarantors named therein and Wells Fargo Bank, National Association. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8-K filed on July 23, 2018)

10.2 *—		Form of Phantom Stock Unit Award under the Company’s Amended and Restated 2006 Equity Incentive Plan (as of February 9, 2016), dated February 6, 2019.⁽¹⁾

10.3 *—		IES Holdings, Inc. Short-Term Incentive Plan. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report onForm 8-K filed March, 5, 2019)

10.4 *—		IES Holdings, Inc. Long-Term Incentive Plan Annual Grant Program. (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report onForm 8-K filed March, 5, 2019)

10.5* —		Form of Cumulative Income Restricted Stock Award Agreement under the Company’s 2006 Equity Incentive Plan (as of February 9, 2016), dated March 4, 2019.⁽¹⁾

10.6* —		Time-Based Restricted Stock Award Agreement, dated as of March 4, 2019, by and between IES Holdings, Inc. and Gary S. Matthews, under the Company’s Amended and Restated 2006 Equity Incentive Plan (as of February 9, 2016).⁽¹⁾

10.7* —		First Stock Price-Based Restricted Stock Award Agreement, dated as of March 4, 2019, by and between IES Holdings, Inc. and Gary S. Matthews, under the Company’s Amended and Restated 2006 Equity Incentive Plan (as of February 9, 2016).⁽¹⁾

10.8* —		Second Stock Price-Based Restricted Stock Award Agreement, dated as of March 4, 2019, by and between IES Holdings, Inc. and Gary S. Matthews, under the Company’s Amended and Restated 2006 Equity Incentive Plan (as of February 9, 2016).⁽¹⁾

10.9 *—		Employment Agreement between IES Holdings, Inc. and Gary S. Matthews, dated as of February 28, 2019.⁽¹⁾

10.10* —		Transition Agreement and Release between IES Holdings, Inc. and Robert W. Lewey, dated as of March 9, 2019.⁽¹⁾

10.11* —		Consulting Fee Agreement between IES Holdings, Inc. and Robert W. Lewey, dated as of March 9, 2019.⁽¹⁾

10.12 —		Second Amendment, dated as of May 1, 2019, to Sublease Agreement, dated as of March 29, 2012 and amended as of March 31, 2016, between Tontine Associates, L.L.C. and IES Management ROO, LP.⁽¹⁾

31.1 —		Rule13a-14(a)/15d-14(a) Certification of ~~Robert W. Lewey, President,~~Gary S. Matthews, Chief Executive Officer⁽¹⁾

~~(1)~~31.2 —		Rule13a-14(a)/15d-14(a) Certification of Tracy A. McLauchlin, Senior Vice President, Chief Financial Officer and Treasurer⁽¹⁾


Exhibit No.		Description

~~(1)~~32.1 —		Section 1350 Certification of ~~Robert W. Lewey, President~~Gary S. Matthews, Chief Executive Officer⁽²⁾

~~(1)~~32.2 —		Section 1350 Certification of Tracy A. McLauchlin, Senior Vice President, Chief Financial Officer and Treasurer⁽²⁾



(1)101.INS		XBRL Instance Document

(1)101.SCH		XBRL Schema Document

(1)101.LAB		XBRL Label Linkbase Document

(1)101.PRE		XBRL Presentation Linkbase Document

(1)101.DEF		XBRL Definition Linkbase Document

(1)101.CAL		XBRL Calculation Linkbase Document

(1)
~~(1)~~		Filed herewith.

(2)	Furnished herewith.

*	Management contract or compensatory plan or arrangement.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on ~~August 3, 2018.~~May 6, 2019.

IES HOLDINGS, INC.


By:		/s/ TRACY A. MCLAUCHLIN
		Tracy A. McLauchlin
		Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer and Authorized Signatory)

3941


	Nine Months Ended June 30, 2018
	Commercial &						Infrastructure
	Industrial			Communications			Solutions		Residential			Corporate			Total
Revenues	$	196,747		$	159,071		$	70,407	$	210,328		$	—		$	636,553
Cost of services		175,066			129,667			54,543		167,836			—			527,112

Gross profit		21,681			29,404			15,864		42,492			—			109,441
Selling, general and administrative		19,624			19,478			13,762		30,995			8,249			92,108
Contingent consideration		—			—			152		—			—			152
Loss (gain) on sale of assets		(35	)		(9	)		6		(1	)		—			(39	)

Operating income (loss)	$	2,092		$	9,935		$	1,944	$	11,498		$	(8,249	)	$	17,220

Other data:
Depreciation and amortization expense	$	1,632		$	1,030		$	3,503	$	452		$	89		$	6,706
Capital expenditures	$	1,638		$	592		$	457	$	696		$	—		$	3,383
Total assets	$	86,012		$	67,270		$	102,233	$	52,500		$	87,948		$	395,963


	Nine Months Ended June 30, 2017
	Commercial &						Infrastructure
	Industrial			Communications			Solutions			Residential		Corporate			Total
Revenues	$	168,006		$	172,058		$	59,572		$	204,527	$	—		$	604,163
Cost of services		154,628			144,668			45,103			157,370		—			501,769

Gross profit		13,378			27,390			14,469			47,157		—			102,394
Selling, general and administrative		14,434			18,086			13,280			32,488		10,797			89,085
Contingent consideration		—			—			50			—		—			50
Gain on sale of assets		(11	)		(1	)		(90	)		34		—			(68	)

Operating income (loss)	$	(1,045	)	$	9,305		$	1,229		$	14,635	$	(10,797	)	$	13,327

Other data:
Depreciation and amortization expense	$	983		$	532		$	4,730		$	436	$	203		$	6,884
Capital expenditures	$	927		$	1,888		$	261		$	517	$	203		$	3,796
Total assets	$	66,190		$	70,427		$	103,323		$	51,995	$	125,222		$	417,157


	June 30, 2018		September 30, 2017
Carrying value	$	558	$	558
Unrealized gains		170		171

Fair value	$	728	$	729


	September 30, 2017
	Total Fair Value			Quoted Prices (Level 1)			Significant Unobservable Inputs (Level 3)
Executive savings plan assets	$	641		$	641		$	—
Executive savings plan liabilities		(529	)		(529	)		—
Contingent consideration		(786	)		—			(786	)

Total	$	(674	)	$	112		$	(786	)


	Contingent Consideration Agreements
Fair value at September 30, 2017	$	786
Issuances		248
Settlements		(391	)
Net adjustments to fair value		152

Fair value at June 30, 2018	$	795


	Commercial & Industrial		Communications		Infrastructure Solutions		Residential		Total
Goodwill at September 30, 2017	$	7,176	$	—	$	30,886	$	8,631	$	46,693
Acquisitions (See Note 13)		—		2,561		—		—		2,561
Adjustments		—		—		45		—		45

Goodwill at June 30, 2018	$	7,176	$	2,561	$	30,931	$	8,631	$	49,299


			June 30, 2018
	Estimated Useful Lives (in Years)		Gross Carrying Amount		Accumulated Amortization		Net
Trademarks/trade names		5 - 20	$	5,044	$	723	$	4,321
Technical library		20		400		96		304
Customer relationships		6 -15		33,469		7,027		26,442
Backlog		1		3,026		2,565		461
Construction contracts		1		2,583		2,375		208

Total intangible assets			$	44,522	$	12,786	$	31,736


Current assets	$	1,765
Property and equipment		355
Intangible assets (primarily customer relationships)		3,439
Goodwill		2,561
Current liabilities		(1,154	)
Long term liabilities		(14	)
Deferred tax liability		(773	)

Net assets acquired	$	6,179


	Unaudited
	Three Months Ended June 30,
	2018		2017
Revenues	$	232,576	$	220,088
Net income attributable to IES Holdings, Inc.	$	8,577	$	5,252


Denver and Roanoke branches	Three Months Ended June 30,
Denver and Roanoke branches	2018			2017
	(In thousands)
Revenues	$	1,261		$	7,575
Cost of services		1,792			9,548
Selling, general and administrative expenses		379			635

Operating loss	$	(910	)	$	(2,608	)


Date	Total Number of Shares Purchased (1)		Average Price Paid Per Share		Total Number of Shares Purchased as Part of a Publicly Announced Plan (2)		Maximum Number of Shares That May Yet Be Purchased Under the Publicly Announced Plan as of June 30, 2018
April 1, 2018 - April 30, 2018		49,262	$	15.28		20,810		716,091

May 1, 2018 – May 31, 2018		4,380	$	17.50		—		716,091

June 1, 2018 – June 30, 2018		—		—		—		716,091

Total		53,642	$	15.46		20,810		716,091

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