Exhibit 99.1
| Contact: Tracy McLauchlin, CFO |
| IES Holdings, Inc. 713-860-1500 |
FOR IMMEDIATE RELEASE
IES Holdings Reports Fiscal 2017 Third Quarter Results and Commercial & Industrial Repositioning
HOUSTON — August 4, 2017 — IES Holdings, Inc. (or “IES” or the “Company”) (NASDAQ: IESC) today announced financial results for the quarter ended June 30, 2017.
Third Quarter 2017 and Year-to-Date Highlights
| • | Revenue of $208 million for the third quarter of fiscal 2017, an increase of 16% compared with the third quarter of fiscal 2016; Revenue of $604 million for the year-to-date 2017, an increase of 23% compared with the year-to-date 2016 |
| • | Income from operations of $4.7 million for the third quarter of fiscal 2017, a decrease of $3.5 million compared with the third quarter of fiscal 2016; Income from operations of $13.3 million for the year-to-date 2017, a decrease of $2.5 million compared with the year-to-date 2016 |
| • | Net income attributable to IES for the third quarter of fiscal 2017 of $5.9 million, or $0.27 per diluted share, a decrease of $4.9 million, or $0.23 per diluted share, compared with the third quarter of fiscal 2016; Net income attributable to IES for the year-to-date 2017 of $10.3 million, or $0.48 per diluted share, a decrease of $8.5 million, or $0.39 per diluted share, compared with the year-to-date 2016 |
| • | Adjusted net income attributable to IES (a non-GAAP financial measure, as defined below) for the third quarter of fiscal 2017 of $3.7 million, a decrease of $3.7 million compared with the third quarter of fiscal 2016; Adjusted net income attributable to IES for the year-to-date 2017 of $10.8 million, a decrease of $3.2 million compared with the year-to-date 2016 |
| • | Backlog of approximately $314 million as of June 30, 2017, as compared to approximately $335 million as of March 31, 2017 and approximately $361 million as of June 30, 2016 |
| • | Commercial & Industrial segment market repositioning included the acquisition of Technical Services and, subsequent to June 30, 2017, the acquisition of NEXT Electric and wind-down of two underperforming branches |
Management Commentary
Robert Lewey, President, stated, “We continued to experience strong growth during our third quarter of 2017, with revenues improving at three of our four segments, compared with the third quarter of 2016. However, our third quarter results were negatively impacted by continued underperformance at our Denver, Colorado and Roanoke, Virginia branches within our Commercial & Industrial segment. Upon completing our detailed reviews of operations, we determined that these branches no longer met our criteria to remain in our portfolio of businesses and made the decision to exit these markets.
As part of our strategic growth plan, we expanded and strengthened offerings in our Commercial & Industrial segment with two recent acquisitions, including NEXT Electric, which provided an opportunity to partner with an experienced and deep management team, and Technical Services, which expanded our mechanical services capabilities. We believe these actions collectively position our Commercial & Industrial segment for steadier growth and diversified, higher margin business going forward.”
Tracy McLauchlin, Chief Financial Officer, added, “During the third quarter we generated $7.5 million of cash flow from operations and $4.7 million of operating income despite a $2.6 million operating loss associated with the wind-down branches. We believe that our strong balance sheet and available liquidity, as well as expected cash flow from both our legacy and acquired businesses, will support our organic and acquisition growth strategies.”
A summary of the historical results of the wind-down branches has been provided in the financial tables included in this press release.
Net Operating Loss Carryforwards
The Company estimates that it has available Net Operating Loss Carryforwards (NOLs) for U.S. federal income tax purposes of approximately $404 million at September 30, 2016, including approximately $142 million resulting from the additional amortization of personal goodwill. The Company’s common stock is subject to a Rights Plan dated November 8, 2016, which is intended to assist in limiting the number of 5% or more owners of the Company’s common stock and, thereby
reduce the risk of a possible “change of ownership” under Section 382 of the Internal Revenue Code of 1986, as amended. Any such “change of ownership” under these rules would limit or eliminate the ability of the Company to use its existing NOLs for federal income tax purposes. There is no guarantee that the Rights Plan will achieve the objective of preserving the value or realization of the NOLs.
Stock Buyback Plan
The Company’s Board of Directors has authorized and previously announced a stock repurchase program for purchasing up to 1.5 million shares of our common stock from time to time. During the quarter ended June 30, 2017, the Company repurchased 51,673 shares at an average price of $15.68 per share.
Non-GAAP Financial Measures and Other Adjustments
This press release includes adjusted net income attributable to IES and, in the non-GAAP reconciliation table included herein, adjusted net income before taxes, both of which are financial measures not calculated in accordance with generally accepted accounting principles in the U.S. (“GAAP”). Management believes that these measures provide useful information to our investors by distinguishing certain noncash events such as our valuation allowances release, and that these measures, when reconciled to net income attributable to IES, which is the most directly comparable GAAP measure, help our investors to better identify underlying trends in the operations of our business and facilitate easier comparisons of our financial performance with prior and future periods and to our peers. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information calculated in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures. A reconciliation of these non-GAAP financial measures to GAAP results has been provided in the financial tables included in this press release.
For further details on the Company’s financial results, please refer to the Company’s annual report on Form 10-K for the fiscal year ended September 30, 2016 and quarterly report on Form 10-Q for the period ended June 30, 2017, to be filed with the Securities and Exchange Commission (“SEC”) by August 4, 2017, and any amendments thereto.
About IES Holdings, Inc.
IES is a holding company that owns and manages diverse operating subsidiaries, comprised of providers of industrial infrastructure services to a variety of end markets. Our approximately 4,000 employees serve clients in the United States. For more information about IES, please visit www.ies-co.com.
Certain statements in this release may be deemed “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, 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 to take action not aligned with other shareholders; the possibility that certain tax benefits of our net operating losses may be restricted or reduced in a change in ownership or a change in the federal tax rate; the potential recognition of valuation allowances on net 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; 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; fluctuations in operating activity due to downturns in levels of construction, seasonality and differing regional economic conditions; and our ability to successfully manage projects, as well as other risk factors discussed in this document, in the Company’s annual report on Form 10-K for the year ended September 30, 2016 and in the Company’s other reports on file with the SEC. You should understand that such risk factors could cause future outcomes to differ materially from those experienced previously or those expressed in such forward-looking statements. The Company undertakes no obligation to publicly update or revise any information, including information concerning its controlling shareholder, 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 release.
Forward-looking statements are provided in this press release 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.
General information about IES Holdings, Inc. can be found at http://www.ies-co.com under “Investors.” The Company’s annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, as well as any amendments to those reports, are available free of charge through the Company’s website as soon as reasonably practicable after they are filed with, or furnished to, the SEC.
IES HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
(UNAUDITED)
| Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Revenues |
$ | 208.3 | $ | 179.6 | $ | 604.2 | $ | 490.3 | ||||||||
| Cost of services |
172.9 | 145.6 | 501.8 | 400.9 | ||||||||||||
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| Gross profit |
35.4 | 34.0 | 102.4 | 89.4 | ||||||||||||
| Selling, general and administrative expenses |
30.8 | 25.7 | 89.1 | 72.5 | ||||||||||||
| Contingent consideration expense |
— | 0.1 | 0.1 | 0.3 | ||||||||||||
| Loss on sale of assets |
(0.1 | ) | — | (0.1 | ) | 0.8 | ||||||||||
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| Income from operations |
4.7 | 8.2 | 13.3 | 15.8 | ||||||||||||
| Interest expense, net |
0.4 | 0.3 | 1.3 | 0.9 | ||||||||||||
| Other expense (income), net |
— | — | (0.1 | ) | — | |||||||||||
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| Income from continuing operations before income taxes |
4.4 | 7.9 | 12.1 | 15.0 | ||||||||||||
| Provision (benefit) for income taxes |
(1.5 | ) | (2.9 | ) | 1.8 | (3.9 | ) | |||||||||
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| Net income |
5.9 | 10.8 | 10.3 | 18.8 | ||||||||||||
| Net income attributable to noncontrolling interest |
— | — | (0.1 | ) | — | |||||||||||
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| Net income attributable to IES Holdings, Inc. |
$ | 5.9 | $ | 10.8 | $ | 10.3 | $ | 18.8 | ||||||||
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| Earnings per share attributable to IES Holdings, Inc.: |
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| Basic |
$ | 0.27 | $ | 0.50 | $ | 0.48 | $ | 0.88 | ||||||||
| Diluted |
$ | 0.27 | $ | 0.50 | $ | 0.48 | $ | 0.87 | ||||||||
| Shares used in the computation of income per share: |
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| Basic (in thousands) |
21,301 | 21,298 | 21,295 | 21,280 | ||||||||||||
| Diluted (in thousands) |
21,556 | 21,457 | 21,551 | 21,412 | ||||||||||||
IES HOLDINGS, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATION OF ADJUSTED NET INCOME
ATTRIBUTABLE TO IES HOLDINGS, INC. (DOLLARS IN MILLIONS)
(UNAUDITED)
| Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Net income attributable to IES Holdings, Inc. |
$ | 5.9 | $ | 10.8 | $ | 10.3 | $ | 18.8 | ||||||||
| Provision (benefit) for income taxes |
(1.5 | ) | (2.9 | ) | 1.8 | (3.9 | ) | |||||||||
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| Adjusted net income before taxes |
4.3 | 7.9 | 12.1 | 14.9 | ||||||||||||
| Current tax expense (1) |
(0.7 | ) | (0.5 | ) | (1.3 | ) | (1.0 | ) | ||||||||
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| Adjusted net income attributable to IES Holdings, Inc. |
$ | 3.7 | $ | 7.3 | $ | 10.8 | $ | 13.9 | ||||||||
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| (1) | Represents the tax expense for the current period which will be paid in cash, and not offset by the utilization of deferred tax assets |
IES HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS)
(UNAUDITED)
| June 30, 2017 | September 30, 2016 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: |
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| Cash and cash equivalents |
$ | 23.9 | $ | 33.0 | ||||
| Restricted cash |
— | 0.3 | ||||||
| Accounts receivable: |
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| Trade, net of allowance |
132.9 | 124.4 | ||||||
| Retainage |
24.6 | 20.1 | ||||||
| Inventories |
19.0 | 13.2 | ||||||
| Costs and estimated earnings in excess of billings |
18.7 | 15.6 | ||||||
| Prepaid expenses and other current assets |
4.7 | 3.2 | ||||||
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| Total current assets |
223.8 | 209.7 | ||||||
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| Property and equipment, net |
24.6 | 15.7 | ||||||
| Goodwill |
45.0 | 39.9 | ||||||
| Intangible assets |
31.5 | 31.7 | ||||||
| Deferred tax assets |
88.9 | 93.5 | ||||||
| Other non-current assets |
3.3 | 3.7 | ||||||
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| Total assets |
$ | 417.2 | $ | 394.3 | ||||
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| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: |
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| Accounts payable and accrued expenses |
$ | 116.2 | $ | 108.8 | ||||
| Billings in excess of costs and estimated earnings |
30.7 | 24.2 | ||||||
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| Total current liabilities |
146.9 | 133.1 | ||||||
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| Long-term debt, net of current maturities |
29.4 | 29.3 | ||||||
| Other non-current liabilities |
4.4 | 6.8 | ||||||
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| Total liabilities |
180.8 | 169.1 | ||||||
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| Noncontrolling interest |
1.7 | 1.8 | ||||||
| STOCKHOLDERS’ EQUITY: |
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| Preferred stock |
— | — | ||||||
| Common stock |
0.2 | 0.2 | ||||||
| Treasury stock, at cost |
(5.4 | ) | (4.8 | ) | ||||
| Additional paid-in capital |
196.5 | 195.2 | ||||||
| Retained earnings |
43.3 | 32.7 | ||||||
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| Total stockholders’ equity |
234.7 | 223.4 | ||||||
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| Total liabilities and stockholders’ equity |
$ | 417.2 | $ | 394.3 | ||||
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IES HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
(UNAUDITED)
| Nine Months Ended March 31, | ||||||||
| 2017 | 2016 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
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| Net income |
$ | 10.3 | $ | 18.8 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
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| Bad debt expense |
— | 0.3 | ||||||
| Amortization of deferred financing cost |
0.2 | 0.3 | ||||||
| Depreciation and amortization |
6.9 | 3.5 | ||||||
| Loss (gain) on sale of assets |
(0.1 | ) | 0.8 | |||||
| Deferred income taxes |
0.5 | — | ||||||
| Non-cash compensation expense |
1.3 | 0.6 | ||||||
| Changes in operating assets and liabilities, net of effects of acquisitions and divestitures: |
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| Accounts receivable |
(1.6 | ) | (8.0 | ) | ||||
| Inventories |
(3.9 | ) | (0.2 | ) | ||||
| Costs and estimated earnings in excess of billings |
(3.2 | ) | 3.0 | |||||
| Prepaid expenses and other current assets |
(9.1 | ) | (3.1 | ) | ||||
| Other non-current assets |
0.4 | (1.3 | ) | |||||
| Accounts payable and accrued expenses |
0.6 | 1.6 | ||||||
| Billings in excess of costs and estimated earnings |
6.4 | 2.5 | ||||||
| Other non-current liabilities |
1.3 | (4.8 | ) | |||||
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| Net cash provided by operating activities |
10.2 | 13.9 | ||||||
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| CASH FLOWS USED IN INVESTING ACTIVITIES: |
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| Purchases of property and equipment |
(3.8 | ) | (2.2 | ) | ||||
| Proceeds from sale of property and equipment |
0.2 | 2.2 | ||||||
| Cash paid for acquisitions, net of cash acquired |
(14.7 | ) | (59.7 | ) | ||||
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| Net cash used in investing activities |
(18.2 | ) | (59.7 | ) | ||||
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| CASH FLOWS FROM FINANCING ACTIVITIES: |
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| Borrowings of debt |
5.3 | 20.0 | ||||||
| Repayments of debt |
(5.3 | ) | (0.1 | ) | ||||
| Contingent consideration payment |
(0.4 | ) | — | |||||
| Distribution to noncontrolling interest |
(0.2 | ) | — | |||||
| Options exercised |
0.2 | 0.1 | ||||||
| Purchase of treasury stock |
(0.9 | ) | (0.6 | ) | ||||
| Change in restricted cash |
0.3 | (0.3 | ) | |||||
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| Net cash provided by (used in) financing activities |
(1.0 | ) | 19.2 | |||||
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| NET INCREASE (DECREASE) IN CASH EQUIVALENTS |
(9.1 | ) | (26.6 | ) | ||||
| CASH AND CASH EQUIVALENTS, beginning of period |
33.0 | 49.4 | ||||||
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| CASH AND CASH EQUIVALENTS, end of period |
$ | 23.9 | $ | 22.8 | ||||
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IES HOLDINGS, INC. AND SUBSIDIARIES
OPERATING SEGMENT STATEMENTS OF OPERATIONS
(DOLLARS IN MILLIONS)
(UNAUDITED)
| Three Months Ended June 30, |
Nine Months Ended June 30, |
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| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Revenue |
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| Commercial & Industrial |
$ | 58.8 | $ | 59.5 | $ | 168.0 | $ | 158.9 | ||||||||
| Communications |
57.1 | 48.7 | 172.1 | 128.8 | ||||||||||||
| Infrastructure Solutions |
22.3 | 14.5 | 59.6 | 40.2 | ||||||||||||
| Residential |
70.2 | 56.9 | 204.5 | 162.4 | ||||||||||||
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| Total Revenue |
$ | 208.3 | $ | 179.6 | $ | 604.2 | $ | 490.3 | ||||||||
| Operating Income |
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| Commercial & Industrial |
$ | (0.2 | ) | $ | 2.9 | $ | (1.0 | ) | $ | 4.7 | ||||||
| Communications |
3.9 | 3.0 | 9.3 | 8.1 | ||||||||||||
| Infrastructure Solutions |
— | 1.3 | 1.2 | 0.7 | ||||||||||||
| Residential |
4.8 | 4.2 | 14.6 | 11.1 | ||||||||||||
| Corporate |
(3.7 | ) | (3.3 | ) | (10.8 | ) | (8.7 | ) | ||||||||
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| Total Operating Income |
$ | 4.7 | $ | 8.2 | $ | 13.3 | $ | 15.8 | ||||||||
IES HOLDINGS, INC. AND SUBSIDIARIES
WIND-DOWN STATEMENTS OF OPERATIONS*
(DOLLARS IN MILLIONS)
(UNAUDITED)
| Three Months Ended June 30, |
Nine Months Ended June 30, |
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| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Revenues |
$ | 7.6 | $ | 7.6 | $ | 27.4 | $ | 18.2 | ||||||||
| Cost of service |
9.5 | 6.9 | 31.6 | 17.8 | ||||||||||||
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| Gross profit |
(2.0 | ) | 0.7 | (4.3 | ) | 0.4 | ||||||||||
| Selling, general and administrative expenses |
0.6 | 0.7 | 2.1 | 2.3 | ||||||||||||
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| Income from operations |
$ | (2.6 | ) | $ | (0.1 | ) | $ | (6.4 | ) | $ | (1.9 | ) | ||||
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| * | Includes results from the Denver and Roanoke branches of our Commercial & Industrial segment. In July, 2017, we implemented a plan to wind-down operations at these branches. |
