IES Holdings reports Q4 adjusted EPS 95c vs. $1.30 last year

Reports Q4 revenue $617M vs. $484M last year."Our fourth quarter results demonstrated a marked improvement in profitability compared to the past two fiscal quarters," said Jeff Gendell, Chairman and Chief Executive Officer. "Despite several operating challenges throughout the year, including poor execution on certain projects, higher input costs and workforce disruptions related to COVID-19, our businesses are building momentum. We remain optimistic about the long-term fundamentals in our key markets, though we realize there will be new challenges on the horizon as we look ahead to fiscal 2023. Most notably, the combined impact of higher interest rates and selling prices on housing affordability is slowing demand for single-family housing in the short term. We also recognize there is heightened uncertainty regarding the overall economy, which could impact our customers’ future capital spending plans. We believe that our flexible capital structure, low fixed costs, and strong balance sheet will allow us to be agile in adjusting to changing demand, and that we are well-positioned to continue to expand our service offerings and pursue market share growth." Our Communications segment’s revenue was $559.8 million in fiscal 2022, a 26% increase compared with fiscal 2021, primarily driven by increased demand from data center customers, which more than offset a decrease in demand from distribution center customers. However, the segment operating income declined 49% to $22.1 million, as a result of certain projects where we incurred substantial losses. During fiscal 2022, we expanded our offerings to our data center customers into a new, adjacent service area; however, we had execution issues and recorded a combined loss of $19.9 million on a series of these projects for the year ended September 30, 2022. As a result of the underperformance in this new service area, we are no longer pursuing this type of work, and as of September 30, 2022, projects in this service area were substantially complete. Our overall operating margins for the fiscal year were also negatively impacted by a shift in our mix of customers, as well as a more competitive bidding environment in the distribution center and warehouse market, which has experienced slowing activity following a period of significant pandemic-related growth. Our Residential segment’s revenue was $1,131.4 million in fiscal 2022, an increase of 65% compared with fiscal 2021, reflecting continued strong demand in the housing market, the impact of pricing, and the incremental contribution of businesses acquired during fiscal 2021. The Residential segment’s operating income was $58.9 million, an increase of 44% from fiscal 2021. Although we benefited from the increase in volumes and pricing, operating margins were negatively impacted by higher material and labor costs. Our Infrastructure Solutions segment’s revenue was $167.1 million in fiscal 2022, an increase of 14% compared with fiscal 2021, reflecting continued strong demand in our generator enclosures business, including a $16.9 million revenue increase from the Tulsa, Oklahoma operation that we acquired in fiscal 2021. However, the segment recorded operating income of $3.6 million, a decrease of 79% from fiscal 2021 partially as a result of supply chain disruptions, execution difficulties on certain projects, and labor availability. In addition, we experienced additional costs and operating inefficiencies associated with the relocation of our Tulsa operation into a new, larger facility that expands capacity while allowing for improved workflow and process efficiency as we grow our capabilities to meet strong customer demand. The transition to and setup of the new facility was completed during the third quarter of fiscal 2022. Our Commercial & Industrial segment’s revenue was $308.5 million in fiscal 2022, an increase of 20% compared with fiscal 2021. However, the segment reported an operating loss of $12.3 million, compared with operating income of $0.4 million in fiscal 2021, primarily as a result of $16.7 million of losses incurred on two projects executed by a single branch, where execution issues led to significant rework and delays, the effects of which were further amplified by customer schedule changes and delays in receiving materials. We also recorded $2.3 million of reserves related to certain legal matters during the year. As part of our ongoing strategic review of our Commercial & Industrial segment, in October 2022, we completed the sale of one of its subsidiaries, STR Mechanical, LLC, a Charlotte, North Carolina-based provider of heating, ventilation and air conditioning services for commercial customers. We are continuing to evaluate the optimal structure for the remainder of the Commercial and Industrial segment, as we seek to mitigate risk while improving the financial and operational performance of the Company."