IES Holdings, Inc. Common Stock 17th Annual Midwest IDEAS Conference

Good morning, everyone. Welcome to day two of the 17th Annual Midwest IDEAS Conference. My name is John McNamara. I am with Three Part Advisors. Our first presentation of the day is IES Holdings. IES designs and installs integrated electrical and technology systems and provides infrastructure products and services. The stock trades on the Nasdaq under the symbol IESC. With us from management today are CEO Matt Simmes and Chief Financial Officer Tracy McLauchlin. Matt, take it away. Thanks.

Good morning. Thanks for joining us. As we talked about, Tracy is with me. She is our CFO, and she also heads up our investor relations on that side of it. To quickly kind of get into it, we are going to start on slide 3. We provide a high level of overview of IES. We are an electrical technology services company providing critical infrastructure products and services to a diversified group of important end user markets across North America. These markets include data centers, e-commerce, distribution, high-tech manufacturing, and operations, including semiconductor plants, industrial manufacturing, healthcare, education, and residential housing. For fiscal 2025, which ended September 30, 2025, we reported a total approximate revenue of $3.4 billion, operating income of $384 million, and adjusted EPS of $13.66 per share. As we have grown our business, we have also continued to expand margins, with income growing faster than revenue.

This margin expansion reflects our ability and our teams to execute projects more effectively, providing outstanding services to our customer in a fast-paced environment. We have over 170 locations across the United States and over 11,000 employees. On slide 4, we highlight key end markets and capabilities we bring across our organization. The chart on the right illustrates our diverse revenue mix, which again has meaningful exposures to end markets experiencing strong growth. Two years ago, more than half of our revenue came from our residential segment, falling to 39% in 2025. Year to date in 2026, residential is tracking under 30% of the business. The change in this mix of business is driven partly due to housing start slowdowns. But more importantly, by rapid growth of other key markets, particularly the data center market.

The changing concentration of revenue among our segments reflects a diversity of end markets that we believe is one of our strengths, protecting against some cyclical nature in the construction business. On slide 5, we have highlighted key pillars of our growth strategy. The strong revenue growth that IES has demonstrated over the past five years was driven by a mix of organic growth, the benefits of capital investments to support further growth across most of our business segments, as well as continued activity on the acquisition front. Though acquisitions have been a part of our capital allocation strategy for the past decade, and will continue to be an important tool in our capital allocation process and a component of our long-term growth strategy.

I would note, over the past several years, particularly fiscal 2021 through 2025, the majority of our top-line growth across all our business segments have been driven by organic growth, supplemented or supported by investments including working capital and CapEx in our different business segments. When attractive acquisition candidates come along that brings service and geographic extensions to our core business areas, we'll always take a look at it. We're very opportunistic in that way. It's worth noting that many of the ideas or opportunities that we evaluate are internally generated through our corporate development team and existing commercial relationship. Ultimately, most of the businesses that we have acquired are not broadly shopped as part of an auction or a formal sales process. Our strong financial position, which is fundamental to our business strategy, enables us to act quickly as needed.

We typically fund our acquisitions with cash flow from operations, using our borrowing capacity to manage the timing of investment opportunities. When we borrow, we typically repay borrowing promptly over the next several quarters. While we are willing to incur debt to support our growth of our business, we do not expect to maintain a debt level at more than one time trailing 12-month EBITDA. Slide 6. The growth strategy has led to strong financial performance. Over the past five years, we've grown revenue at a 23% compound annual growth rate and operating income at 50%, demonstrating both strong top-line growth, but also positive operating leverage across our business segments as operating margins increase from just under 4% to over 11% over that same time period. In a few minutes, Tracy will cover our 2026 performance through the first nine months of the fiscal year.

As mentioned, our year ends September 30th, so we'll be headed into our final month of the fiscal year of 2026. Tracy will talk on this more in a couple of minutes. Moving to slide 7. We believe our strategy is supported by a diverse range of end markets. I should go to 7. Technology infrastructure investments in the U.S. is currently dominated by capital spending on data centers to support the growth of generative AI, cloud computing, and digital lifestyle. This is currently the largest growth driver for our communications, our infrastructure solutions, and our commercial industrial segments. Continued and growing investment in the manufacturing facilities in the U.S., as well as continued growth and investment in e-commerce, has also benefited our business, and we expect it will continue in the future.

These trends increase the need for cabling communications technology, while also creating demand in the adjacent infrastructure solutions business, which produces enclosures for backup power generators, as well as custom manufactured electrical mechanical components. There is also an evolving electrical landscape in the United States, which requires the critical electrical infrastructure services we provide. The trend I just mentioned in AI-driven investments in the United States has brought an increased attention to the investment needed in the electrical infrastructure across this country. As power requirements for new data centers outpace growth in power generation capacity, we expect increasing focus on electrical reliability, backup power, and grid stability. Finally, for our residential segment is poised to benefit over the long term from pent-up demand for housing, following what we believe is an under-building of homes over the past decade.

Current affordability and consumer sentiment continues to weigh on the housing market as persistent high interest rates and elevated home prices, combined with higher input costs, dampen demand. Despite these near-term pressures, we remain committed to the residential business and optimistic about the future. We are the nation's largest provider of electrical contracting services to home builders in the United States, serving national and regional builders. Our strong balance sheet, national footprint, and records of outstanding service provide us with an opportunity to increase market share, even in a weaker market. We are also continuing the expansion of our plumbing and HVAC trades into markets where we have established presence with our electrical trade, which helps us offset some of the housing weakness.

As seen on slide 8, since fiscal 2016, we have been active strategic acquirers of business and bring a strong track record of completing accretive acquisitions in all four business segments. When you look at this page, you will notice in some years, we have done up to four acquisitions, and some years we have done none. This reflects our discipline and patient approach to capital allocation. If an acquisition target does not meet our stringent requirements, we will pass on the opportunity and look for others. On slide 9, I would like to take a minute to highlight a recent agreement to acquire DBM Global, which will be our largest acquisition to date, and add a fifth operating segment to IES Holdings. The purchase price will be approximately $650 million, and we expect the acquisition to close quarter-end December 31st, 2026, pending regulatory approval.

DBM provides structural steel fabrication services and will expand our capabilities and manufacturing capacity. DBM works with many of the large general contractors that are already existing IES customers, and it will also further diversify our end markets in areas such as arenas, stadiums, and marquee commercial developments, like the Golden 1 arena in Sacramento, or the 270 Park Avenue project pictured here. We are excited to welcome DBM and its 3,400 employees, and strong management team to IES. Allocating capital effectively is one of our top priorities at IES. On slide 10, you can see we have been generating increasing amounts of cash over the past several years, and we have focused on deploying that cash to generate the best returns. First and foremost, we have used our cash to support organic growth of the business, investing in working capital and CapEx needed to continue to expand our offerings to our customers.

Next, we have funded the acquisitions I just discussed out of operating cash flow. While we use debt to manage timing of acquisition opportunities, we typically promptly pay down debt out of operating cash flow to maintain strong, flexible balance sheet. As of June 30th, 2026, we had no outstanding debt. However, we do expect to take on some debt with the DBM acquisition. Let me jump deeper into our business segments, beginning with communications on slide 11. This segment is a nationwide provider of technology integration services, including structured cabling, fiber optic cabling, audiovisual, security, and distributed antenna system. The segment's largest end market is data centers, distribution centers, high-tech manufacturing facilities, and other commercial applications are also important end markets. In the segment, we may work directly for project owners, such as large technology companies, or our direct customers may be general contractors.

This business has substantially grown over the past five years, with growth over the past two years being driven by growing investments in the data center market. It is worth noting that the investment levels and growth in other core markets for the segment, such as high-tech manufacturing and e-commerce, also have healthy activity. We have been involved in the data center market for over 20 years, and we are a trusted partner of many of the largest and most important customers in that market. Many of our customers within this segment are building larger, more complex facilities, and also expanding their geographic footprint across the country. Our ability to manage and support the scaling of their needs from both a facility size, complexity, and a workforce need, as well as our ability to quickly support expansions into new geographies, is yet another differentiator for the IES business segment.

Moving to slide 12, our residential. This segment provides electrical, HVAC, and plumbing installations for both single-family and multi-family builders. As indicated on the bottom of the right map, our business is heavily concentrated in Texas and Florida, but substantially growing our footprint across the fastest-growing regions in the Southeast, Southwest, and Midwest regions of the U.S. While we have historically provided electrical services to the residential market, we have added plumbing and HVAC capabilities through an acquisition in Florida in 2021. Since then, we have worked to expand HVAC and plumbing throughout our broader residential footprint. This expansion has allowed us to offset some impact in the weakness of the housing market over the past year. Slide 13, turning to our infrastructure solutions segment. In this segment, we provide power solutions, including generator enclosures, switchgear, bus duct, as well as electrical and mechanical apparatus services.