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Energy Services of America CORP

ESOA
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Business Summary

Energy Services of America Corporation (ESOA) operates as a contractor and service company primarily in the mid-Atlantic and central regions of the United States, serving the natural gas, petroleum, water distribution, automotive, chemical, and power industries. The company's core business involves the construction, replacement, and repair of natural gas pipelines and storage facilities, particularly intrastate pipelines, for utility and private natural gas companies. It also provides services for the oil industry related to pipelines, storage facilities, and plant work. For the power, chemical, and automotive sectors, ESOA offers electrical and mechanical installations and repairs, including substation and switchyard services, site preparation, equipment setting, pipe fabrication and installation, packaged buildings, and transformers. Additionally, the company provides corrosion protection, horizontal drilling, liquid pipeline construction, pump station construction, production facility construction, water and sewer pipeline installations, and various maintenance and repair services. The company has expanded its capabilities to include broadband and solar electric system installations, as well as civil and general contracting services. Revenue generation is primarily through competitive and negotiated contracts, often based on unit prices, with some lump sum or time and material projects. The majority of its customers are located in West Virginia, Virginia, Ohio, Pennsylvania, and Kentucky, with work also performed in Alabama, Michigan, Illinois, Tennessee, North Carolina, and Indiana.

ESOA's core business model is centered on providing specialized construction and maintenance services across critical infrastructure sectors. Revenue is generated through various contract types, predominantly unit price contracts, but also lump sum and cost plus/time and material (T&M) contracts. The company serves a diverse customer base, including major players like TransCanada Corporation, NiSource, Inc., Marathon Petroleum, Mountaineer Gas, Nucor Steel, West Virginia American Electric Power, Toyota Motor Manufacturing, Bayer Chemical, Dow Chemical, and Kentucky American Water, as well as various state, county, and municipal public service districts. The company's workforce is a mix of union and non-union employees, with union members covered by collective bargaining agreements.

The company's operations are segmented into three reportable categories: Underground Infrastructure Construction, Industrial Construction, and Building Construction. The Underground Infrastructure Construction segment focuses on new construction and maintenance of water and wastewater pipelines, natural gas distribution and transmission pipelines, natural gas stations, corrosion protection, and horizontal drilling services. For the fiscal year ended September 30, 2025, this segment generated revenues of $222,966,841 and reported an operating loss of $(1,934,020) . The Industrial Construction segment primarily handles electrical, mechanical, HVAC/R, controls, and fire protection services for automotive, chemical, power, and manufacturing facilities. This segment contributed revenues of $138,935,139 and operating income of $9,199,801 for the fiscal year ended September 30, 2025. The Building Construction segment is involved in new construction and rehabilitation projects for schools, local and state government buildings, and small bridges, often subcontracting most of the work. For the fiscal year ended September 30, 2025, this segment recorded revenues of $49,099,393 and operating income of $3,266,300 .

For the fiscal year ended September 30, 2025, Energy Services reported total consolidated operating revenues of $411,001,373 , an increase from $351,876,861 in the prior fiscal year. The cost of revenues for the period was $372,225,660 , resulting in a gross profit of $38,775,713 and a gross margin of 9.4% . Selling and administrative expenses totaled $34,560,240 . Income from operations was $4,215,473 , yielding an operating margin of 1.0% . Net income for the fiscal year was $379,708 , with basic earnings per share of $0.02 and diluted earnings per share of $0.02 . Cash and cash equivalents stood at $12,241,408 as of September 30, 2025. Total debt, including current maturities of long-term debt and long-term debt less current maturities, was $72,204,213 . The company's working capital was $46.9 million .

Compared to the fiscal year ended September 30, 2024, total revenue increased by $59.1 million , or 16.8% . This growth was driven by a significant increase in Gas & Water Distribution revenues, which rose by $67.1 million to $149,574,917 , an 81.5% increase. Electrical, Mechanical, & General services also saw an increase of $8.4 million , or 4.5% , reaching $196,840,319 . Conversely, Gas & Petroleum Transmission revenues decreased by $16.5 million , or (20.3)% , to $64,586,137 . Total gross profit decreased by $11.2 million , or (22.4)% , from $49,954,316 in fiscal 2024 to $38,775,713 in fiscal 2025, with the gross margin contracting from 14.2% to 9.4% . This decline was primarily due to decreased profitability in water projects, increased competition in the water industry and gas transmission business, and integrating new employees in the water business line. Selling and administrative expenses increased by $4.4 million to $34,560,240 , partly due to increased business opportunities, management hirings, and $1.9 million related to the Tribute acquisition, including $608,000 in amortization of acquired intangible assets. Income from operations decreased by $15.6 million , or (78.7)% , from $19,835,246 to $4,215,473 . Net income saw a substantial decrease from $25.1 million in fiscal 2024 to $380,000 in fiscal 2025, largely influenced by a $15.6 million lawsuit judgment received in fiscal 2024 that did not recur.

During the fiscal year, Energy Services completed two acquisitions. On December 2, 2024, the company acquired substantially all the physical assets of Tribute Contracting & Consultants, LLC for $21.2 million in cash and $2.0 million in common stock. This acquisition contributed to an increase in goodwill of $2,356,724 and intangible assets of $1,930,000 . On September 30, 2025, Nitro, a subsidiary, acquired the assets of Rigney Digital Systems Ltd. for $3.0 million in cash, $1.0 million in common stock, and a five-year $500,000 sellers' note. This acquisition resulted in goodwill of $3,421,526 and intangible assets of $964,000 . The company also sold Revolt Energy, LLC, a residential solar installation subsidiary, for a nominal consideration on March 1, 2025, as it was not material to the consolidated financial statements.

Business Outlook

The company's backlog of work to be completed on existing contracts increased to $259.7 million at September 30, 2025, from $243.2 million at September 30, 2024. Most projects are expected to be completed within two to five months, with larger projects taking seven to eighteen months. Revenue recognition for remaining unsatisfied performance obligations is expected to be $205.1 million in less than twelve months.

The company is focusing on increasing water project opportunities, which contributed to an 81.5% increase in Gas & Water Distribution revenues in the past fiscal year. The acquisition of Tribute Contracting & Consultants, LLC in December 2024, which constructs water distribution and wastewater systems for public municipalities in West Virginia, Ohio, and Kentucky, is a key growth vector. Additionally, the acquisition of Rigney Digital Systems Ltd. in September 2025, an HVAC/R controls company, is expected to enhance Nitro's industrial construction capabilities. The company also continues to pursue new construction opportunities in the automotive and manufacturing industries, which led to a $34.9 million increase in Industrial Construction revenues in the last fiscal year.

In terms of operational outlook, the company experienced a decrease in gross profit percentage from 14.2% in fiscal 2024 to 9.4% in fiscal 2025, primarily due to greater competition in the water industry and decreased profitability in gas transmission projects. The increase in unallocated shop expenses by $3.0 million to $4.6 million was attributed to decreased internal equipment charges to projects. Selling and administrative expenses are expected to continue to be impacted by the need for additional management to support organic and inorganic growth, as evidenced by the $4.4 million increase in fiscal 2025, including $1.9 million related to the Tribute acquisition. The company is also investing in technology infrastructure, as indicated by increased information technology and cybersecurity costs.

Planned capital allocation includes continued investment in property and equipment, with acquisitions totaling $28.4 million for fiscal year 2025. The company's depreciation expense for fiscal year 2025 was $12.0 million , and amortization expense for intangible assets was $1,064,493 . The company renewed its $30.0 million line of credit with a maturity date of June 28, 2027, with an interest rate equal to the "Wall Street Journal" Prime Rate with a floor of 4.99% , which was 7.25% at September 30, 2025. The company had $2,907,997 available on its line of credit at September 30, 2025. The company paid cash dividends of $0.03 per share quarterly in fiscal 2025 and repurchased $844,230 of common stock, with 786,707 shares remaining available under the repurchase program.

The company faces structural headwinds and execution risks, including the ongoing review by the SBA of its $9.8 million Paycheck Protection Program (PPP) Loans. The SBA could reverse its previous forgiveness determination, potentially requiring repayment of the loans and imposing penalties, which would negatively impact the company's financial condition. The company was not in compliance with all financial covenants at September 30, 2025, but received a waiver from its lender and projects to meet all covenant requirements for the next twelve months. The pipeline industry is highly cyclical and influenced by natural gas and electricity market prices, government regulations, and the development of alternative energy sources. Increased competition in the water and gas transmission business lines has already impacted gross margins.

Risk Factors

The company faces several material risks, including operational variability due to adverse weather, changes in work mix, labor shortages, and unfavorable economic conditions, which can significantly impact quarterly results. Acquisitions, such as Tribute and Rigney, carry risks of integration difficulties, unforeseen expenditures, and potential dilution to existing stockholders if equity is issued. Contractual risks include the potential for fixed-price contracts to be impacted by unanticipated cost increases, and the possibility of contract cancellations or delays. The company's dependence on surety bonds for certain projects means that a limitation or elimination of bonding access could negatively impact performance. Credit risk exists due to extending credit to customers, with a concentration risk noted for TransCanada Corporation, which represented 10.4% of revenue in fiscal 2024 and 13.9% of accounts receivable at September 30, 2025. Cybersecurity threats pose a risk of data breaches and operational disruptions. Inflation could increase operating costs and impact customer affordability. Societal responses to climate change may lead to new regulations and changes in customer behavior, potentially reducing demand for services in certain sectors. The ongoing SBA review of the $9.8 million PPP Loans presents a significant financial risk, as the company could be required to repay the loans and face penalties. The company was not in compliance with all financial covenants at September 30, 2025, and while a waiver was received, future compliance is projected but not guaranteed. Participation in multi-employer pension plans carries a risk of withdrawal liability if the company ceases participation, with the amount of such an assessment not reasonably estimable.

Management Priorities

Management's message to shareholders emphasizes the company's continued focus on growth, both organic and inorganic, despite facing increased competition and operational challenges. The company achieved a 16.8% increase in total revenue for the fiscal year ended September 30, 2025, reaching $411.0 million , driven by strong performance in Gas & Water Distribution and Electrical, Mechanical, & General services. Management highlighted the strategic acquisitions of Tribute Contracting & Consultants, LLC and Rigney Digital Systems Ltd. as key drivers for expanding capabilities and market reach. While acknowledging a decrease in gross profit and operating income, management attributed this to factors such as greater competition in the water industry, decreased profitability in gas transmission projects, and the integration of new acquisitions. Management also noted the increase in selling and administrative expenses due to necessary management hirings and increased legal, audit, IT, cybersecurity, and investor relations costs associated with growth. The company's commitment to shareholder returns is evident through the initiation of a quarterly cash dividend of $0.03 per share in fiscal year 2025 and ongoing share repurchase program, with 786,707 shares remaining available for repurchase. Management projects to meet all covenant requirements for the next twelve months, despite not being in compliance with all covenants at September 30, 2025, for which a waiver was obtained.

View Source Annual Report on SEC.gov ↗

References

  1. [1] Item 1, Business — Overview
  2. [2] Item 1, Business — Overview
  3. [3] Item 1, Business — Overview
  4. [4] Item 7, MD&A — Segment Results
  5. [5] Item 7, MD&A — Segment Results
  6. [6] Item 7, MD&A — Segment Results
  7. [7] Item 7, MD&A — Segment Results
  8. [8] Item 7, MD&A — Segment Results
  9. [9] Item 7, MD&A — Segment Results
  10. [10] Item 7, MD&A — Results of Operations for the Fiscal Year Ended September 30, 2025, Compared to the Fiscal Year Ended September 30, 2024.
  11. [11] Item 7, MD&A — Results of Operations for the Fiscal Year Ended September 30, 2025, Compared to the Fiscal Year Ended September 30, 2024.
  12. [12] Item 7, MD&A — Cost of Revenues
  13. [13] Item 7, MD&A — Gross Profit
  14. [14] Item 7, MD&A — Gross Profit
  15. [15] Item 7, MD&A — Selling and administrative expenses
  16. [16] Item 7, MD&A — Income from operations
  17. [17] Item 7, MD&A — Segment Results
  18. [18] Item 7, MD&A — Net Income
  19. [19] Item 7, MD&A — Net Income
  20. [20] Item 7, MD&A — Net Income
  21. [21] Item 7, MD&A — Comparison of Financial Condition at September 30, 2025 Compared to September 30, 2024.
  22. [22] Item 15, Note 15 — Short-Term and Long-Term Debt
  23. [23] Item 7, MD&A — Liquidity and Capital Resources
  24. [24] Item 7, MD&A — Revenue
  25. [25] Item 7, MD&A — Revenue
  26. [26] Item 7, MD&A — Revenue
  27. [27] Item 7, MD&A — Revenue
  28. [28] Item 7, MD&A — Revenue
  29. [29] Item 7, MD&A — Revenue
  30. [30] Item 7, MD&A — Revenue
  31. [31] Item 7, MD&A — Revenue
  32. [32] Item 7, MD&A — Revenue
  33. [33] Item 7, MD&A — Revenue
  34. [34] Item 7, MD&A — Revenue
  35. [35] Item 7, MD&A — Gross Profit
  36. [36] Item 7, MD&A — Gross Profit
  37. [37] Item 7, MD&A — Gross Profit
  38. [38] Item 7, MD&A — Gross Profit
  39. [39] Item 7, MD&A — Gross Profit
  40. [40] Item 7, MD&A — Gross Profit
  41. [41] Item 7, MD&A — Selling and administrative expenses
  42. [42] Item 7, MD&A — Selling and administrative expenses
  43. [43] Item 7, MD&A — Selling and administrative expenses
  44. [44] Item 7, MD&A — Selling and administrative expenses
  45. [45] Item 7, MD&A — Income from operations
  46. [46] Item 7, MD&A — Income from operations
  47. [47] Item 7, MD&A — Income from operations
  48. [48] Item 7, MD&A — Income from operations
  49. [49] Item 7, MD&A — Net Income
  50. [50] Item 7, MD&A — Net Income
  51. [51] Item 7, MD&A — Income from lawsuit judgement
  52. [52] Item 15, Note 26 — Acquisitions
  53. [53] Item 15, Note 26 — Acquisitions
  54. [54] Item 15, Note 26 — Acquisitions
  55. [55] Item 15, Note 26 — Acquisitions
  56. [56] Item 15, Note 26 — Acquisitions
  57. [57] Item 15, Note 26 — Acquisitions
  58. [58] Item 15, Note 26 — Acquisitions
  59. [59] Item 15, Note 26 — Acquisitions
  60. [60] Item 15, Note 26 — Acquisitions
  61. [61] Item 15, Note 10 — Uncompleted Contracts
  62. [62] Item 15, Note 10 — Uncompleted Contracts
  63. [63] Item 15, Note 8 — Performance Obligations
  64. [64] Item 7, MD&A — Revenue
  65. [65] Item 7, MD&A — Industrial Construction
  66. [66] Item 7, MD&A — Gross Profit
  67. [67] Item 7, MD&A — Gross Profit
  68. [68] Item 7, MD&A — Cost of Revenues
  69. [69] Item 7, MD&A — Cost of Revenues
  70. [70] Item 7, MD&A — Selling and administrative expenses
  71. [71] Item 7, MD&A — Selling and administrative expenses
  72. [72] Item 7, MD&A — Comparison of Financial Condition at September 30, 2025 Compared to September 30, 2024.
  73. [73] Item 7, MD&A — Depreciation and Amortization
  74. [74] Item 7, MD&A — Depreciation and Amortization
  75. [75] Item 7, MD&A — Operating Line of Credit
  76. [76] Item 7, MD&A — Operating Line of Credit
  77. [77] Item 7, MD&A — Operating Line of Credit
  78. [78] Item 7, MD&A — Operating Line of Credit
  79. [79] Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
  80. [80] Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
  81. [81] Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
  82. [82] Item 7, MD&A — Paycheck Protection Program Loans
  83. [83] Item 7, MD&A — Concentration of Credit Risk
  84. [84] Item 7, MD&A — Concentration of Credit Risk
  85. [85] Item 1A, Risk Factors — The SBA may review the Company’s PPP Loan forgiveness application and if the SBA disagrees with the Company’s certification the Company could be subject to penalties and the repayment of the PPP Loans, which could negatively impact the Company’s business, financial condition and results of operations and prospects.
  86. [86] Item 7, MD&A — Revenue
  87. [87] Item 7, MD&A — Revenue
  88. [88] Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
  89. [89] Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Analysis on 5/21/2026