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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED March 31, 2022

OR

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

Commission File Number: 001-37796

Infrastructure & Energy Alternatives, Inc.
(Exact name of registrant as specified in charter)
 
Delaware  47-4787177
(State or other jurisdiction
of incorporation)
  (IRS Employer
Identification No.)
 
6325 Digital Way
Suite 460
IndianapolisIndiana
 46278
(Address of principal executive offices) (Zip Code)
 
Registrant’s telephone number, including area code: (800) 688-3775

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbols(s)Name of exchange on which registered
Common Stock, $0.0001 par valueIEAThe Nasdaq Stock Market LLC
Warrants for Common StockIEAWWThe Nasdaq Stock Market LLC

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 such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past ninety days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act:

Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company Emerging growth company

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 in Rule 12b-2 of the Act). Yes No

Number of shares of Common Stock outstanding as of the close of business on May 9, 2022: 48,323,406.



Infrastructure and Energy Alternatives, Inc.
Table of Contents
PART I. FINANCIAL INFORMATION
Part II. OTHER INFORMATION




PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
INFRASTRUCTURE AND ENERGY ALTERNATIVES, INC.
Condensed Consolidated Balance Sheets
($ in thousands, except per share data)
(Unaudited)
March 31, 2022December 31, 2021
Assets
Current assets:
Cash and cash equivalents$28,732 $124,027 
Accounts receivable, net254,540 280,700 
Contract assets220,119 214,298 
Prepaid expenses and other current assets73,070 42,774 
        Total current assets576,461 661,799 
Property, plant and equipment, net148,486 138,605 
Operating lease assets35,904 37,292 
Intangible assets, net17,352 18,969 
Goodwill37,373 37,373 
Company-owned life insurance4,786 4,944 
Deferred income taxes3,226  
Other assets771 771 
        Total assets$824,359 $899,753 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable$131,415 $164,925 
Accrued liabilities128,832 163,364 
Contract liabilities148,452 126,128 
Current portion of finance lease obligations24,778 24,345 
Current portion of operating lease obligations10,401 10,254 
Current portion of long-term debt1,573 1,960 
          Total current liabilities445,451 490,976 
Finance lease obligations, less current portion38,714 30,096 
Operating lease obligations, less current portion27,049 28,540 
Long-term debt, less current portion290,891 290,730 
Warrant obligations7,395 5,967 
Deferred compensation7,658 7,988 
Deferred income taxes 8,199 
         Total liabilities$817,158 $862,496 
Commitments and contingencies (Note 7)
Stockholders' equity:
Common stock, par value, $0.0001 per share; 150,000,000 and 150,000,000 shares authorized; 48,323,406 and 48,027,359 shares issued and 48,323,406 and 48,027,359 outstanding at March 31, 2022 and December 31, 2021, respectively
4 4 
Additional paid in capital243,465 246,450 
Accumulated deficit(236,268)(209,197)
           Total stockholders' equity7,201 37,257 
           Total liabilities and stockholders' equity$824,359 $899,753 

See accompanying notes to condensed consolidated financial statements.
1


INFRASTRUCTURE AND ENERGY ALTERNATIVES, INC.
Condensed Consolidated Statements of Operations
($ in thousands, except per share data)
(Unaudited)

Three Months Ended
March 31,
20222021
Revenue$360,095 $276,412 
Cost of revenue356,265 259,871 
Gross profit3,830 16,541 
Selling, general and administrative expenses34,882 24,846 
Loss from operations(31,052)(8,305)
Other income (expense), net:
Interest expense, net(6,026)(14,359)
Warrant liability fair value adjustment(1,428)(300)
Other income11 138 
Loss before benefit for income taxes(38,495)(22,826)
Benefit for income taxes11,424 2,392 
Net loss$(27,071)$(20,434)
Less: Convertible Preferred Stock dividends (656)
Net loss available for common stockholders$(27,071)$(21,090)
Net loss per common share - basic and diluted(0.56)(0.91)
Weighted average shares - basic and diluted48,129,331 23,057,731 

See accompanying notes to condensed consolidated financial statements.

2


INFRASTRUCTURE AND ENERGY ALTERNATIVES, INC.
Condensed Consolidated Statements of Stockholders' Equity (Deficit)
($ in thousands)
(Unaudited)

Common Stock
SharesPar ValueAdditional Paid-in CapitalAccumulated DeficitTotal Equity (Deficit)
Balance at December 31, 202021,009 $2 $35,305 $(125,468)$(90,161)
Net loss— — — (20,434)(20,434)
Earnout Shares1,803 — — — — 
Share-based compensation— — 727 — 727 
Equity plan compensation521 — (2,909)— (2,909)
Exercise of warrants15 — — — — 
Series A Preferred dividends— — (656)— (656)
Balance at March 31, 202123,348 $2 $32,467 $(145,902)$(113,433)
Balance at December 31, 202148,027 $4 $246,450 $(209,197)$37,257 
Net loss— — — (27,071)(27,071)
Share-based compensation— — 1,630 — 1,630 
Equity plan compensation296 — (1,810)— (1,810)
Repurchases of public warrants— — (2,805)— (2,805)
Balance at March 31, 202248,323 $4 $243,465 $(236,268)$7,201 

See accompanying notes to condensed consolidated financial statements.
3


INFRASTRUCTURE AND ENERGY ALTERNATIVES, INC.
Condensed Consolidated Statements of Cash Flows
($ in thousands)
(Unaudited)
Three Months Ended March 31,
20222021
Cash flows from operating activities:
Net loss$(27,071)$(20,434)
Adjustments to reconcile net loss to net cash used in operating activities:
   Depreciation and amortization12,286 10,799 
   Warrant liability fair value adjustment1,428 300 
   Amortization of debt discounts and issuance costs377 2,859 
   Share-based compensation expense1,630 727 
   Deferred income taxes(11,424)(2,392)
   Other, net(572)(902)
   Change in operating assets and liabilities:
       Accounts receivable26,160 (7,513)
       Contract assets(5,821)(1,513)
       Prepaid expenses and other assets(30,296)(27,304)
       Accounts payable and accrued liabilities(68,042)(31,593)
       Contract liabilities22,324 23,186 
       Net cash used in operating activities(79,021)(53,780)
Cash flow from investing activities:
   Company-owned life insurance158 (269)
   Purchases of property, plant and equipment(4,788)(3,920)
   Proceeds from sale of property, plant and equipment553 667 
       Net cash used in investing activities(4,077)(3,522)
Cash flows from financing activities:
   Proceeds from line of credit - long term10,000  
Payments on line of credit - long term(10,000) 
Payments on long-term debt(603)(686)
   Payments on finance lease obligations(6,979)(7,971)
Shares for tax withholding on release of restricted stock units(1,810)(2,909)
Repurchases of public warrants(2,805) 
       Net cash used in financing activities(12,197)(11,566)
Net change in cash and cash equivalents(95,295)(68,868)
Cash and cash equivalents, beginning of the period124,027 164,041 
Cash and cash equivalents, end of the period$28,732 $95,173 

See accompanying notes to condensed consolidated financial statements.
4



INFRASTRUCTURE AND ENERGY ALTERNATIVES, INC.
Condensed Consolidated Statements of Cash Flows
($ in thousands)
(Unaudited)
(Continued)
Three Months Ended March 31,
20222021
Supplemental disclosures:
  Cash paid for interest10,618 10,691 
  Cash (received) for income taxes(145)(290)
Schedule of non-cash activities:
   Acquisition of assets/liabilities through finance lease16,030 2,183 
   Acquisition of assets/liabilities through operating lease1,360 1,101 
   Series A Preferred dividends declared 656 

See accompanying notes to condensed consolidated financial statements.

5


INFRASTRUCTURE AND ENERGY ALTERNATIVES, INC.
Notes to the Condensed Consolidated Financial Statements
(unaudited)

Note 1. Business, Basis of Presentation and Significant Accounting Policies

    Infrastructure and Energy Alternatives, Inc. (f/k/a M III Acquisition Corporation ("M III")), a Delaware corporation, is a holding company organized on August 4, 2015 (together with its wholly owned subsidiaries, unless otherwise noted or the context otherwise requires, "IEA" or the "Company").

    The Company specializes in providing complete engineering, procurement and construction services throughout the United States ("U.S.") for the renewable energy, traditional power and civil infrastructure industries. These services include the design, site development, construction, installation and restoration of infrastructure. The Company has historically focused on the wind industry, but has recently focused on further expansion into the solar market and with its 2018 acquisitions expanded its construction capabilities and geographic footprint in the areas of renewables, environmental remediation, industrial maintenance, specialty paving, and heavy civil and rail infrastructure construction, creating a diverse national platform of specialty construction capabilities.
Reportable Segments
The Company has two reportable segments: the Renewables ("Renewables") segment and the Heavy Civil and Industrial ("Specialty Civil") segment. See Note 10. Segments for a description of the reportable segments and their operations.
Principles of Consolidation
    The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. ("GAAP") for interim financial information and with the instructions for Quarterly Reports on Form 10-Q and Rule 10-01 of Regulation S-X. Pursuant to these rules and regulations, certain information and footnote disclosures normally included in the annual audited consolidated financial statements prepared in accordance with GAAP have been condensed or omitted.
    The unaudited condensed consolidated financial statements include the accounts of IEA and its wholly owned domestic and foreign subsidiaries. The Company occasionally forms joint ventures with unrelated third parties for the execution of single contracts or projects. The Company assesses its joint ventures to determine if they meet the qualifications of a variable interest entity ("VIE") in accordance with Accounting Standard Codification Topic 810, Consolidation ("ASC 810"). For construction joint ventures that are not VIEs or fully consolidated but for which the Company has significant influence, the Company accounts for its interest in the joint ventures using the proportionate consolidation method, see Note 11. Joint Ventures.
In the opinion of management, these financial statements reflect all adjustments (consisting of normal recurring adjustments) that are necessary to present fairly the results of operations for the interim periods presented. The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. These financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2021 and notes thereto included in the Company’s 2021 Annual Report on Form 10-K filed with the SEC on March 7, 2022 (the "Annual Report").
Basis of Accounting and Use of Estimates    
    The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP. The preparation of the condensed consolidated financial statements in conformity with GAAP requires the use of estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and the accompanying notes. Key estimates include: the recognition of revenue and project profit or loss; fair value estimates related to warrant liabilities; valuations of goodwill and intangible assets; asset lives used in computing depreciation and amortization; accrued self-insured claims; other reserves and accruals; accounting for income taxes; and the estimated impact of contingencies and ongoing litigation. While management believes that its estimates are reasonable when considered in conjunction with the Company’s consolidated financial position and results of operations, actual results could differ materially from those estimates.
The prior period classification of the warrant liability fair value adjustment for the Series B Preferred Stock - Anti-dilution warrants has been revised to conform to the current period presentation within the condensed consolidated statements of operations. This reclassification has no effect on net income or stockholders' equity.


6



Revenue Recognition
    The Company derives revenue primarily from construction projects performed under contracts for specific projects requiring the construction and installation of an entire infrastructure system or specified units within an infrastructure system. Contracts contain multiple pricing options, such as fixed price, unit price, or time and materials. Generally, renewable energy projects are performed for private customers while Specialty Civil projects are performed for various governmental entities.
    Revenue derived from projects billed on a fixed-price basis totaled 74.0% and 78.7% of consolidated revenue from operations for the three months ended March 31, 2022 and 2021, respectively. Revenue derived from projects billed on a unit price basis totaled 24.9% and 17.5% of consolidated revenue from operations for the three months ended March 31, 2022 and 2021, respectively. Revenue and related costs for contracts billed on a time and materials basis are recognized as the services are rendered. Revenue derived from projects billed on a time and materials basis totaled 1.1% and 3.8% of consolidated revenue from operations for the three months ended March 31, 2022 and 2021, respectively. The prior period presentation of the components of the Company’s revenue by contract type has been revised to conform to the current presentation.

    Construction contract revenue is recognized over time using the cost-to-cost measure of progress for fixed price contracts. The cost-to-cost measure of progress best depicts the continuous transfer of control of goods or services to the customer. The contractual terms provide that the customer compensates the Company for services rendered.

    Contract costs include all direct materials, labor and subcontracted costs, as well as indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs and the costs of capital equipment. The cost estimation and review process for recognizing revenue over time under the cost-to-cost method is based on the professional knowledge and experience of the Company’s project managers, engineers and financial professionals. Management reviews estimates of total contract transaction price and total project costs on an ongoing basis. Changes in job performance, job conditions and management’s assessment of expected variable consideration are factors that influence estimates of the total contract transaction price, total costs to complete those contracts and profit recognition. Changes in these factors could result in revisions to revenue and costs of revenue in the period in which the revisions are determined on a prospective basis, which could materially affect the Company’s results of operations for that period. Provisions for losses on uncompleted contracts are recorded in the period in which such losses are determined.
Performance Obligations
    A performance obligation is a contractual promise to transfer a distinct good or service to the customer and is the unit of account under ASC Topic 606, Revenue from Contracts with Customers. The transaction price of a contract is allocated to distinct performance obligations and recognized as revenue when or as the performance obligations are satisfied. The Company’s contracts often require significant integrated services and, even when delivering multiple distinct services, are generally accounted for as a single performance obligation. Contract amendments and change orders are generally not distinct from the existing contract due to the significant integrated service provided in the context of the contract and are accounted for as a modification of the existing contract and performance obligation. With the exception of certain Specialty Civil service contracts, the majority of the Company’s performance obligations are generally completed within one year.
    When more than one contract is entered into with the same customer on or close to the same date, the Company evaluates whether those contracts should be combined and accounted for as a single contract, as well as whether those contracts should be accounted for as more than one performance obligation. This evaluation requires significant judgment and is based on the facts and circumstances of the various contracts, which could change the amount of revenue and profit recognition in a given period depending upon the outcome of the evaluation.
    Remaining performance obligations represent the amount of unearned transaction prices for contracts, including approved and unapproved change orders. As of March 31, 2022, the amount of the Company’s remaining performance obligations was $2.1 billion. The Company expects to recognize approximately 81.7% of its remaining performance obligations as revenue during the next twelve months. Revenue recognized from performance obligations satisfied in previous periods was $(12.9) million and $0.4 million for the three months ended March 31, 2022 and 2021, respectively.
Variable Consideration
    Transaction pricing for the Company’s contracts may include variable consideration, such as unapproved change orders, claims, incentives and liquidated damages. Management estimates variable consideration for a performance obligation utilizing estimation methods that best predict the amount of consideration to which the Company will be entitled. Variable consideration is included in the estimated transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Management’s
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estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based on legal opinions, past practices with the customer, specific discussions, correspondence or preliminary negotiations with the customer and all other relevant information that is reasonably available. The effect of a change in variable consideration on the transaction price of a performance obligation is typically recognized as an adjustment to revenue on a cumulative catch-up basis. To the extent unapproved change orders, claims and liquidated damages reflected in the transaction price are not resolved in the Company’s favor, or to the extent incentives reflected in the transaction price are not earned, there could be reductions in, or reversals of, previously recognized revenue.
    As of March 31, 2022 and December 31, 2021, the Company included approximately $93.5 million and $94.5 million, respectively, of estimated transaction price adjustments that arise from unapproved change orders in process of being resolved in the normal course of business and/or from transaction price disputes in contracts that are subject to resolution through litigation, arbitration and other legal proceedings. These transaction price adjustments are included within Contract Assets or Contract Liabilities in the Company’s condensed consolidated balance sheets as appropriate. The Company actively engages with its customers to complete the final approval process on unapproved change orders and generally expects these processes to be completed within one year, while sometimes disputes subject to formal legal proceedings can take longer than a year to resolve. Amounts ultimately realized upon resolution with customers of these transaction price adjustments could be higher or lower than such estimated amounts.
Disaggregation of Revenue
    The following tables disaggregate revenue by customers and services performed, which the Company believes best depicts the nature, amount, timing and uncertainty of its revenue:
(in thousands)Three Months Ended
March 31, 2022March 31, 2021
Renewables Segment
   Wind$117,932 $146,858 
   Solar125,682 33,516 
$243,614 $180,374 
Specialty Civil Segment
   Heavy civil$54,246 $48,871 
   Rail14,681 26,868 
   Environmental47,554 20,299 
$116,481 $96,038 
Concentrations
    Each of the Company's renewable projects is generally considered an individual customer because, typically, each project's developer forms its own project legal entity. The following table provides the approximate revenue and accounts receivable concentrations, net of allowances, for Renewables and Specialty Civil customers that accounted for 10% of the Company's revenue or accounts receivable for the periods indicated:

Revenue %
Three Months EndedAccounts Receivable %
March 31, 2022March 31, 2021March 31, 2022December 31, 2021
Company A (Renewables Segment)10.0 %***
* Amount was not above 10% threshold


Construction Joint Ventures

Certain contracts are executed through joint ventures. The arrangements are often formed for the execution of single contracts or projects and allow the Company to share risks and secure specialty skills required for project execution.
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In accordance with ASC 810, the Company assesses its joint ventures at inception to determine if they meet the qualifications of a VIE. The Company considers a joint venture a VIE if either (a) the total equity investment is not sufficient to permit the entity to finance its activities without additional subordinated financial support, (b) characteristics of a controlling financial interest are missing (either the ability to make decisions through voting or other rights, the obligation to absorb the expected losses of the entity or the right to receive the expected residual returns of the entity), or (c) the voting rights of the equity holders are not proportional to their obligations to absorb the expected losses of the entity and/or their rights to receive the expected residual returns of the entity and substantially all of the entity’s activities either involve or are conducted on behalf of an investor that has disproportionately few voting rights. Upon the occurrence of certain events outlined in ASC 810, the Company reassesses its initial determination of whether the joint venture is a VIE.
The Company also evaluates whether it is the primary beneficiary of each VIE and consolidates the VIE if the Company has both (a) the power to direct the economically significant activities of the entity and (b) the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the VIE. The Company considers the contractual agreements that define the ownership structure, distribution of profits and losses, risks, responsibilities, indebtedness, voting rights and board representation of the respective parties in determining whether it qualifies as the primary beneficiary. The Company also considers all parties that have direct or implicit variable interests when determining whether it is the primary beneficiary. When the Company is determined to be the primary beneficiary, the VIE is consolidated. In accordance with ASC 810, management’s assessment of whether the Company is the primary beneficiary of a VIE is performed continuously.
Construction joint ventures that do not involve a VIE, or for which the Company is not the primary beneficiary, are evaluated for consolidation under the voting interest model that considers whether the Company owns or controls more than 50% of the voting interest in the joint venture. For construction joint ventures that are not consolidated but for which the Company has significant influence, the Company accounts for its interest in the joint ventures using the proportionate consolidation method, whereby the Company’s proportionate share of the joint ventures’ assets, liabilities, revenue and cost of operations are included in the appropriate classifications in the Company’s condensed consolidated financial statements. See Note 11. Joint Ventures for additional discussion regarding joint ventures.
Recently Issued Accounting Standards Not Yet Adopted
    Management has evaluated other recently issued accounting pronouncements and does not believe that they will have a significant impact on the condensed consolidated financial statements or related disclosures.

COVID-19 Pandemic
    The Company believes that the COVID-19 pandemic did not have a material adverse impact on the Company’s financial results for the three months ended March 31, 2022 and 2021, respectively. Currently, most of the Company’s construction services are deemed essential under governmental mitigation orders and both of the Company's business segments continue to operate. The Company has issued several notices of force majeure for the purpose of recognizing delays in construction schedules due to COVID-19 outbreaks on certain of its work sites and has also received notices of force majeure from the owners of certain projects and certain subcontractors. Management does not believe that any delays on projects related to these events of force majeure will have a material impact on the Company's results of operations.
The effects of the COVID-19 pandemic could affect the Company’s future business activities and financial results, including new contract awards, reduced crew productivity, contract amendments or cancellations, higher operating costs or delayed project start dates or project shutdowns that may be requested or mandated by governmental authorities or others. Management believes that it is taking appropriate steps to mitigate any potential impact to the Company; however, given the uncertainty regarding the potential effects of the COVID-19 pandemic, any future impacts cannot be quantified or predicted with specificity.

Note 2. Contract Assets and Liabilities and Accounts Receivable, Net

The Company bills its customers based on contractual terms, including milestone billings based on the completion of certain phases of the work. Sometimes, billing occurs after revenue recognition, resulting in unbilled revenue, which is accounted for as a contract asset. Sometimes the Company receives advance mobilization payments from its customers before revenue is recognized, resulting in deferred revenue, which is accounted for as a contract liability.

    Contract assets in the condensed consolidated balance sheets represents the following:

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costs and estimated earnings in excess of billings, which arise when revenue has been recorded but the amount has not been billed; and

retainage amounts for the portion of the contract price earned by us for work performed but held for payment by the customer as a form of security until the Company reaches certain construction milestones or completes the project.

    Contract assets consisted of the following as of the dates indicated:
(in thousands)March 31, 2022December 31, 2021
Costs and estimated earnings in excess of billings on uncompleted contracts$140,805 $120,900 
Retainage receivable79,314 93,398 
$220,119 $214,298 

Contract assets as of March 31, 2022 include approximately $33.5 million for transaction price disputes in which the Company is pursuing settlement through dispute resolution and arbitration. The Company believes that these disputed amounts are collectible and recoverable under the applicable contracts. See Note 1. Business, Basis of Presentation and Significant Accounting Policies for further discussion of revenue recognized on variable consideration.

    Contract liabilities consisted of the following as of the dates indicated:
(in thousands)March 31, 2022December 31, 2021
Billings in excess of costs and estimated earnings on uncompleted contracts$147,931 $125,658 
Loss on contracts in progress521 470 
$148,452 $126,128 
    
    Revenue recognized for the three months ended March 31, 2022 that was included in the contract liability balance at December 31, 2021 was approximately $89.0 million, and revenue recognized for the three months ended March 31, 2021 that was included in the contract liability balance at December 31, 2020 was approximately $87.8 million.
    
Accounts Receivable and Allowance for Credit Losses

Activity in the allowance for credit losses for the periods indicated was as follows:
Three Months Ended
March 31,
(in thousands)20222021
Allowance for credit losses at beginning of period$ $ 
    Plus: provision for (reduction in) allowance  
    Less: write-offs, net of recoveries  
Allowance for credit losses at period end$ $ 

Accounts Receivable at March 31, 2022, includes $18.3 million for transaction price disputes discussed as a part of contract assets. The Company is pursuing settlement through arbitration and believes that this amount is fully recoverable but cannot guarantee the timing of the collection due to the pending arbitration.



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Note 3. Property, Plant and Equipment, Net

    Property, plant and equipment consisted of the following as of the dates indicated:
(in thousands)March 31, 2022December 31, 2021
Buildings and leasehold improvements$6,540 $6,884 
Land17,600 17,600 
Construction equipment245,627 227,807 
Office equipment, furniture and fixtures2,874 3,687 
Vehicles8,448 8,289 
Total property, plant and equipment281,089 264,267 
Accumulated depreciation(132,603)(125,662)
Property, plant and equipment, net$148,486 $138,605 

    Depreciation expense of property, plant and equipment was $10.7 million and $9.2 million for the three months ended March 31, 2022 and 2021, respectively.


Note 4. Goodwill and Intangible Assets, Net

    The following table provides the changes in the carrying amount of goodwill, by reporting unit:
(in thousands)RenewablesSpecialty CivilTotal
January 1, 2021$3,020 $34,353 $37,373 
   Adjustments   
December 31, 2021$3,020 $34,353 $37,373 
   Adjustments   
March 31, 2022$3,020 $34,353 $37,373 

The goodwill recorded in the Company's Specialty Civil reporting unit is deductible for income tax purposes over a 15-year period, with the exception of $2.9 million that is not deductible.
    
Intangible assets consisted of the following as of the dates indicated:
March 31, 2022December 31, 2021
($ in thousands)Gross Carrying AmountAccumulated AmortizationNet Carrying AmountWeighted Average Remaining LifeGross Carrying AmountAccumulated AmortizationNet Carrying AmountWeighted Average Remaining Life
Customer relationships$26,500 $(13,213)$13,287 3.75 years$26,500 $(12,267)$14,233 4 years
Trade name13,400 (9,335)4,065 1.75 years13,400 (8,664)4,736 2 years
$39,900 $(22,548)$17,352 $39,900 $(20,931)$18,969 
    
Amortization expense associated with intangible assets for the three months ended March 31, 2022 and 2021, totaled $1.6 million and $1.6 million, respectively.

    The following table provides the annual intangible amortization expense currently expected to be recognized for the years 2022 through 2025:
(in thousands)Remainder of 2022202320242025
Amortization expense$4,849 $5,841 $3,785 $2,877 



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Note 5. Fair Value of Financial Instruments

    The Company applies ASC Topic 820, Fair Value Measurement, which establishes a framework for measuring fair value. ASC 820 defines fair value as an exit price, which is the price that would be received for an asset or paid to transfer a liability in the Company’s principal or most advantageous market in an orderly transaction between market participants on the measurement date. The fair value hierarchy established in ASC 820 generally requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect the assumptions that market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the entity’s own assumptions based on market data and the entity’s judgments about the assumptions that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances.

    The valuation hierarchy is composed of three levels. The classification within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The levels within the valuation hierarchy are described below:

Level 1 — Inputs to the fair value measurement are observable inputs, such as quoted prices in active markets for identical assets or liabilities listed on active market exchanges.
Level 2 — Inputs to the fair value measurement are determined using prices for recently traded assets and liabilities with similar underlying terms, as well as direct or indirect observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals.
Level 3 — Inputs to the fair value measurement are unobservable inputs, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities.

    The following table sets forth information regarding the Company's liabilities measured at fair value on a recurring basis:    
March 31, 2022December 31, 2021
(in thousands)Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Liabilities
Private warrants$ $626 $ $626 $ $410 $ $410 
Series B Preferred Stock - Anti-dilution warrants  6,769 6,769   5,557 5,557 
Total liabilities$ $626 $6,769 $7,395 $ $410 $5,557 $5,967 
    
The following is a reconciliation of the beginning and ending balances of recurring fair value measurements using Level 3 inputs:
(in thousands)Series B Preferred Stock - Anti-dilution warrants
Beginning Balance, December 31, 2021$5,557 
Fair value adjustment - loss recognized in other income1,212 
Ending Balance, March 31, 2022
$6,769 

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The information below describes the balance sheet classification and the fair value measurement for the Company's liabilities measured at fair value on a recurring basis:

Private Warrants (recurring) - The Company has 295,000 private warrants that are not listed on a securities exchange, and the Company adjusts the fair value at the end of each fiscal period using the price on that date multiplied by the remaining private warrants. The private warrants were recorded as warrant obligations at the end of the quarter and the fair value adjustment was recorded as a warrant liability fair value adjustment for the three months ended March 31, 2022. For further discussion see Note 8. Earnings Per Share.

    Series B Preferred Stock - Anti-dilution Warrants (recurring) - In 2019, the Company entered into three equity purchase agreements and issued Series B Preferred Stock. The agreements provided that upon the conversion of any of the convertible Series A Preferred Stock to shares of common stock, holders of the Series B Preferred Stock would receive additional warrants (anti-dilution warrants) to purchase shares of common stock at a price of $0.0001 per share. The number of shares of common stock attributable to the warrants issued to Series B Preferred Stockholders for anti-dilution warrants was determined as follows:

upon the exercise of any warrant with an exercise price of $11.50 or higher. As of March 31, 2022, the Company had 5,962,020 warrants issued before M III's merger with the Company ("Merger Warrants") outstanding, exercisable for 2,981,010 shares of common stock at $11.50 per share. The conversion of Merger Warrants would result in the issuance of an additional 0.9 million anti-dilution shares pursuant to the anti-dilution warrants. As of March 31, 2022, the Company recorded the anti-dilution warrants at fair value, which was estimated using a Monte Carlo simulation based on certain significant unobservable inputs, such as a risk rate premium, volatility of stock, conversion stock price, current stock price and amount of time remaining before expiration of the Merger Warrants. The calculation derived a fair value of $6.8 million for the liability based on an anti-dilution share fair value of $7.46.

Significant unobservable inputs used in the fair value calculation as of the period indicated were as follows:

March 31, 2022
Stock price$11.85 
Conversion stock price$11.50 
Time before Merger Warrant expiration 0.99 
Stock volatility45.66 %
Risk-free interest rate1.60 %

    Other financial instruments of the Company not listed in the table consist of cash and cash equivalents, accounts receivable, accounts payable and other current liabilities that approximate their fair values. Additionally, management believes that the carrying value of the Company's outstanding debt balances, further discussed in Note 6. Debt, approximate fair value.

Note 6. Debt

    Debt consisted of the following obligations as of the dates indicated:
(in thousands)March 31, 2022December 31, 2021
Senior unsecured notes300,000 300,000 
Commercial equipment notes2,954 3,557 
   Total principal due for long-term debt302,954 303,557 
Unamortized debt discount and issuance costs(10,490)(10,867)
Less: Current portion of long-term debt(1,573)(1,960)
   Long-term debt, less current portion$290,891 $290,730 


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Senior Unsecured Notes

On August 17, 2021, IEA Energy Services LLC, a wholly owned subsidiary of the Company ("Services"), issued $300.0 million aggregate principal amount of its 6.625% senior unsecured notes due 2029 (the "Senior Unsecured Notes"), in a private placement. Interest is payable on the Senior Unsecured Notes on each February 15 and August 15, commencing on February 15, 2022. The Senior Unsecured Notes will mature on August 15, 2029. The Senior Unsecured Notes are guaranteed on a senior unsecured basis by the Company and certain of its domestic wholly owned subsidiaries (the "Guarantors").

Credit Agreement

On August 17, 2021, Services, as the borrower, and certain guarantors (including the Company), entered into a Credit Agreement (the "Credit Agreement") with a syndicate of lenders and CIBC Bank USA in its capacities as the Administrative and Collateral Agent for the lenders. The Credit Agreement provides for a $150.0 million senior secured revolving credit facility. The Credit Agreement is guaranteed by the Company and certain subsidiaries of the Company (the "Credit Agreement Guarantors" and together with Services, the "Loan Parties") and is secured by a security interest in substantially all of the Loan Parties’ personal property and assets. Services has the ability to increase available borrowing under the credit facility by an additional amount up to $50.0 million subject to certain conditions.

Interest rates on the credit facility are based upon (1) an index rate that is established at the highest of the prime rate or the sum of the federal funds rate plus 0.50%, or (2) at Services’ election, a LIBOR rate, plus in either case, an applicable interest rate margin. The applicable interest rate margins are adjusted on a quarterly basis based upon Services’ first lien net leverage within the range of 1.00% to 2.50% for index rate loans and 2.00% and 3.50% for LIBOR loans. Borrowings under the credit facility shall initially bear interest at a rate per annum equal to LIBOR plus 2.50%. In anticipation of LIBOR's phase out, the Credit Agreement includes a well-documented transition mechanism for selecting a benchmark replacement rate for LIBOR. In addition to paying interest on outstanding principal under the credit facility, Services is required to pay a commitment fee to the lenders under the credit facility for unused commitments. The commitment fee rate ranges from 0.30% to 0.45% per annum depending on Services’ First Lien Net Leverage Ratio (as defined in the Credit Agreement).

Debt Covenants

The credit facility requires Services to comply with a quarterly maximum consolidated First Lien Net Leverage Ratio test and minimum Fixed Charge Coverage ratio as follows:

Fixed Charge Coverage Ratio - The Loan Parties shall not permit the Fixed Charge Coverage Ratio (as defined in the Credit Agreement) as of the last day of any four consecutive fiscal quarter period ending on the last day of a fiscal quarter to be less than 1.20:1.00.

First Lien Net Leverage Ratio – The Loan Parties will not permit the First Lien Net Leverage Ratio (as defined in the Credit Agreement) as of the last day of any four consecutive fiscal quarter period ending on the last day of a fiscal quarter to exceed 1.75:1.00 (subject to certain increases for permitted acquisitions).

In addition, the Credit Agreement contains a number of covenants that, among other things and subject to certain exceptions, limit Services’ ability and the ability of its restricted subsidiaries, including the Company, to incur indebtedness or guarantee debt; incur liens; make investments, loans and acquisitions; merge, liquidate or dissolve; sell assets, including capital stock of subsidiaries; pay dividends on its capital stock or redeem, repurchase or retire its capital stock; amend, prepay, redeem or purchase subordinated debt; and engage in transactions with affiliates.

The Credit Agreement contains certain customary representations and warranties, affirmative covenants and events of default (including, among others, an event of default upon a change of control). If an event of default occurs, the lenders under the credit facility are entitled to take various actions, including the acceleration of amounts due under the credit facility and all actions permitted to be taken by a secured creditor.

As of March 31, 2022, management believed the Company was in compliance with these covenants.

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Contractual Maturities

    Contractual maturities of the Company's outstanding principal on debt obligations are as follows as of March 31, 2022:
(in thousands)Maturities
Remainder of 2022$1,354 
2023836 
2024441 
2025255 
202668 
Thereafter300,000 
Total contractual maturities$302,954 


Note 7. Commitments and Contingencies

    In the ordinary course of business, the Company enters into agreements that provide financing for its machinery and equipment, facility and vehicle needs. The Company reviews these agreements for potential lease classification, and at inception, determines whether a lease is an operating or finance lease. Lease assets and liabilities, which generally represent the present value of future minimum lease payments over the term of the lease, are recognized as of the commencement date. Under ASC Topic 842, Leases, leases with an initial lease term of twelve months or less are classified as short-term leases and are not recognized in the condensed consolidated balance sheets unless they contain a purchase option that is reasonably certain to be exercised.
    Lease term, discount rate, variable lease costs and future minimum lease payment determinations require the use of judgment as these are based on the facts and circumstances related to each specific lease. Lease terms are generally based on their initial non-cancelable terms, unless there is a renewal option that is reasonably certain to be exercised. Various factors, including economic incentives, intent, past history and business need are considered to determine if a renewal option is reasonably certain to be exercised. The implicit rate in a lease agreement is used when it can be determined. Otherwise, the Company's incremental borrowing rate, which is based on information available as of the lease commencement date, including applicable lease terms and the current economic environment, is used to determine the value of the lease obligation.
Finance Leases
    
    The Company has obligations, exclusive of associated interest, recognized under various finance leases for equipment totaling $63.5 million and $54.4 million at March 31, 2022 and December 31, 2021, respectively. Gross amounts recognized within property, plant and equipment in the condensed consolidated balance sheets under these finance lease agreements at March 31, 2022 and December 31, 2021, totaled $159.6 million and $143.6 million, less accumulated depreciation of $77.8 million and $71.4 million, respectively, for net balances of $81.8 million and $72.2 million, respectively. Depreciation expense for assets held under the finance leases is included in cost of revenue in the condensed consolidated statements of operations.

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    The future minimum payments of finance lease obligations are as follows as of March 31, 2022:
(in thousands)
Remainder of 2022$21,783 
202316,817 
202412,701 
202510,316 
20266,582 
Thereafter486 
Future minimum lease payments68,685 
Less: Amount representing interest(5,193)
Present value of minimum lease payments63,492 
Less: Current portion of finance lease obligations24,778 
Finance lease obligations, less current portion$38,714 

Operating Leases
    
    In the ordinary course of business, the Company enters into non-cancelable operating leases for certain of its facilities, vehicles and equipment. The Company has obligations, exclusive of associated interest, totaling $37.5 million and $38.8 million at March 31, 2022 and December 31, 2021, respectively. Property under these operating lease agreements at March 31, 2022 and December 31, 2021, totaled $35.9 million and $37.3 million, respectively.

    The Company has long-term power-by-the-hour equipment rental agreements with a construction equipment manufacturer that have a guaranteed minimum monthly hour requirement. The minimum guaranteed amount based on the Company's current operations is $5.8 million per year. Total expense under these agreements are listed in the following table as variable lease costs.

    The future minimum payments under non-cancelable operating leases are as follows as of March 31, 2022:
(in thousands)
Remainder of 2022$9,529 
202310,457 
20245,884 
20253,030 
20262,371 
Thereafter18,634 
Future minimum lease payments49,905 
Less: Amount representing interest(12,455)
Present value of minimum lease payments37,450 
Less: Current portion of operating lease obligations10,401 
Operating lease obligations, less current portion$27,049 


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Lease Information
Three months ended
March 31, 2022March 31, 2021
Finance Lease cost:
   Amortization of right-of-use assets$6,522 $5,835 
   Interest on lease liabilities737 817 
Operating lease cost3,376 3,394 
Short-term lease cost24,629 23,604 
Variable lease cost1,108 1,247 
Sublease Income(33)(33)
Total lease cost$36,339 $34,864 
Other information:
Cash paid for amounts included in the measurement of lease liabilities:
   Operating cash flows from finance leases$737 $817 
   Operating cash flows from operating leases$3,340 $3,245 
Weighted-average remaining lease term - finance leases3.40 years2.41 years
Weighted-average remaining lease term - operating leases7.61 years8.17 years
Weighted-average discount rate - finance leases5.17 %6.18 %
Weighted-average discount rate - operating leases6.62 %7.00 %

Letters of Credit and Surety Bonds

    In the ordinary course of business, the Company may be required to post letters of credit and surety bonds to customers in support of performance under certain contracts. Such letters of credit are generally issued by a bank or similar financial institution. The letter of credit or surety bond commits the issuer to pay specified amounts to the holder of the letter of credit or surety bond under certain conditions. If the letter of credit or surety bond issuer were required to pay any amount to a holder, the Company would be required to reimburse the issuer, which, depending upon the circumstances, could result in a charge to earnings. As of March 31, 2022, and December 31, 2021, the Company was contingently liable under letters of credit issued under its credit facility, in the amount of $17.3 million and $31.1 million, respectively, related to projects and insurance. In addition, as of March 31, 2022 and December 31, 2021, the Company had outstanding surety bonds on projects with nominal amounts of $3.5 billion and $3.3 billion, respectively. The remaining approximate exposure related to these surety bonds amounted to $456.6 million and $353.5 million, respectively.

Legal Proceedings

The Company is a nominal defendant to a lawsuit, instituted in December 2019 in the Delaware Chancery Court by a purported stockholder of the Company, against the Company’s Board of Directors (the "Board"), Oaktree Capital Management ("Oaktree"), and Ares Management, LLC ("Ares"), from which Ares was subsequently dismissed. The complaint asserts a variety of claims arising out of the sale of Series B Preferred Stock and warrants to Ares and Oaktree in May 2019. The complaint alleges claims for breach of fiduciary duty directly on behalf of putative class of stockholders and derivatively on behalf of the Company, aiding and abetting breach of fiduciary duty both derivatively and directly, and unjust enrichment derivatively on behalf of the Company. The plaintiff is seeking rescission of the transaction, unspecified monetary damages, and fees. On July 28, 2021, the Company and the plaintiff stockholder entered into a memorandum of understanding to settle the lawsuit against all defendants, subject to approval by the Delaware Chancery Court, the terms of which do not require payment of any settlement funds to the plaintiff except that, as they are entitled to do under Delaware law, the plaintiffs are entitled to ask the Court to award them attorneys’ fees in connection with the settlement. The timing of the approval of the settlement, if any, by the Court is unknown at this time but is not expected to occur until later in 2022. The Company has placed its director and officer liability insurance carriers on notice of the lawsuit and the proposed settlement; pursuant to the coverage terms, the Company is subject to a $1.5 million deductible, which the Company has exhausted. Pursuant to agreements entered into in connection with the sale of Series B Preferred Stock, the Company is obligated to indemnify Oaktree and Ares for any legal fees and damages incurred by either of them in connection with this matter.

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The Company is involved in a variety of other legal cases, claims and other disputes that arise from time to time in the ordinary course of its business. While the Company believes it has good defense against these cases and intends to defend them vigorously, it cannot provide assurance that it will be successful in recovering all or any of the potential damages it has claimed or in successfully defending claims against the Company. While the lawsuits and claims are asserted for amounts that may be material, should an unfavorable outcome occur, management does not currently expect that any currently pending matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows, although there can be no certainty that this will be the case.

Note 8. Earnings Per Share

    The Company calculates earnings (loss) per share ("EPS") in accordance with ASC Topic 260, Earnings per Share. Basic EPS is computed by dividing income (loss) available to common stockholders by the weighted average number of common shares of common stock outstanding during the period.

    Income (loss) available to common stockholders is computed by deducting the dividends accrued for the period on cumulative preferred stock from net income and net income allocated to participating securities. If there is a net loss, the amount of the loss is increased by those preferred dividends.

    Diluted EPS, where applicable, assumes the dilutive effect of (i) Series A cumulative convertible preferred stock, using the if-converted method, (ii) publicly traded warrants, (iii) Series B Preferred Stock - Warrants and (iv) the assumed exercise of in-the-money stock options and the assumed vesting of outstanding restricted stock units ("RSUs"), using the treasury stock method.

    Whether the Company has net income, or a net loss determines whether potential issuances of common stock are included in the diluted EPS computation or whether they would be anti-dilutive. As a result, if there is a net loss, diluted EPS is computed in the same manner as basic EPS is computed. Similarly, if the Company has net income but its preferred dividend adjustment made in computing income available to common stockholders results in a net loss available to common stockholders, diluted EPS would be computed the same as basic EPS.



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The calculations of basic and diluted EPS are as follows for the periods indicated:
Three Months Ended
March 31,
($ in thousands, except per share data)20222021
Numerator:
  Net loss$(27,071)$(20,434)
  Less: Convertible Preferred Stock dividends (656)
    Net loss available to common stockholders(27,071)(21,090)
Denominator:
  Weighted average common shares outstanding - basic and diluted48,129,331 23,057,731 
Anti-dilutive:(1)
  Convertible Series A Preferred Stock (2)
 1,628,269 
  Series B Preferred Stock - Warrants (3)
94,077 7,684,057 
  Pre-Funded Warrants(4)
4,327,353  
  Options (5)
480,124 426,824 
  RSUs (6)
1,744,028 1,958,045 
Basic and Diluted EPS(0.56)(0.91)

(1)    As of March 31, 2022 and 2021, there were public warrants to purchase 2,981,010 and 8,480,000 shares of common
stock at $11.50 per share that were not potentially dilutive, as the warrants’ exercise price was greater than the average
market price of the common stock during the period.

(2)     On August 2, 2021, the Series A Preferred Stock was converted into common stock.

(3)     On August 2, 2021, the Company issued shares of common stock to ASOF Holdings I, L.P. ("ASOF") and Ares Special Situations Fund IV, L.P. (together, the "Ares Parties") for the exercise of all Series B Preferred Stock warrants held by the Ares Parties. As of March 31, 2022, there were 94,077 Series B Preferred Stock warrants that were considered anti-dilutive.

(4)    On August 2, 2021, the Company issued 7,747,589 Pre-Funded Warrants to ASOF that are considered participating because the holder is entitled to participate in any distributions similar to that of common shareholders. As of the three months ended March 31, 2022, there were 4,327,353 Pre-Funded Warrants.
    
(5)    As of March 31, 2022 and 2021, there were 480,124 and 426,824 vested and unvested options, respectively, that were considered anti-dilutive.

(6)    As of March 31, 2022 and 2021, there were 401,636 and 116,867 unvested RSUs, respectively. These awards were not considered dilutive as the respective performance targets were not achieved.
Merger Warrants

M III was formed as a special purpose acquisition company on August 4, 2015, and issued public and private warrants before the merger with the Company. As of March 31, 2022, the Company had 5,962,020 Merger Warrants outstanding, of which 295,000 are private warrants. For each two Merger Warrants, one share of common stock will be issuable at an exercise price of $11.50 per share until the expiration of the Merger Warrants on March 26, 2023. For further discussion about the valuation of the private warrants, see Note 5. Fair Value of Financial Instruments.

On November 4, 2021, the Board authorized a repurchase program for the Company’s publicly traded warrants. This repurchase program allows the Company to purchase up to $25.0 million of warrants, and will end no later than the expiration of the warrants on March 26, 2023.
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The following information is related to purchases made for the three months ended March 31, 2022:

Issuer Purchases of Equity Securities
PeriodTotal Number of Warrants PurchasedAverage Price Paid per WarrantApproximate
Dollar Value of Warrants that May Yet Be Purchased Under the Plans or Programs
(in thousands)
January1,009,802 $1.48 $11,457 
February505,597 1.79 10,536 
March177,230 2.06 10,167 
Total1,692,629 $1.64 
As of March 31, 2022, the Company has repurchased 10,963,160 warrants.

Series B Preferred Stock Anti-dilution Warrants

The Company also had potential outstanding warrants related to the Series B Preferred Stock issuance. Additional warrants would be issued upon the exercise of any warrant with an exercise price of $11.50 or higher. See Note 5. Fair Value of Financial Instruments for further discussion.

Stock Compensation
    
    Under ASC Topic 718, Compensation — Stock Compensation, stock-based compensation expense is measured at the date of grant, based on the calculated fair value of the stock-based award, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the award).

    The fair value of RSUs is based on the closing market price of the Company's common stock on the date of the grant. Stock compensation expense for RSUs is amortized using the straight-line method over the service period. For the three months ended March 31, 2022 and 2021, the Company recognized $1.6 million and $0.7 million in compensation expense, respectively.


Note 9. Income Taxes

    The Company’s statutory federal tax rate was 21.0% for the periods ended March 31, 2022 and 2021, respectively. State tax rates for the same period vary among states and range from approximately 0.8% to 12.0%. A small number of states do not impose an income tax.

    The effective tax rates for the three months ended March 31, 2022 and 2021 were 29.7% and 10.5%, respectively. The difference between the Company’s effective tax rate and the federal statutory rate primarily results from permanent differences related to the interest accrued for the Series B Preferred Stock and executive compensation, which are not deductible for federal and state income tax purposes. There were no changes in uncertain tax positions during the periods ended March 31, 2022 and 2021.

    The Company made use of the payroll tax deferral provision of the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") to defer the 6.2% social security tax. The remaining amount required to be paid by December 31, 2022 is $7.0 million.

Note 10. Segments

    The Company operates its business as two reportable segments: the Renewables segment and the Specialty Civil segment. Each of the Company's reportable segments is comprised of similar business units that specialize in services unique to their respective markets. The classification of revenue and gross profit for segment reporting purposes can at times require judgment on the part of management. The Company's segments may perform services across industries or perform joint services for customers in multiple industries. To determine reportable segment gross profit, certain allocations, including
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allocations of shared and indirect costs, such as facility costs, equipment costs and indirect operating expenses, were made based on segment revenue.

    Separate measures of the Company’s financial results, including capital expenditures and cash flows by reportable segment, are not produced or utilized by management to evaluate segment performance. A substantial portion of the Company’s fixed assets are owned by and accounted for in its equipment department, including operating machinery, equipment and vehicles, as well as office equipment, buildings and leasehold improvements, and are used on an interchangeable basis across the Company's reportable segments. As such, for reporting purposes, total under/over absorption of equipment expenses consisting primarily of depreciation is allocated to the Company's two reportable segments based on segment revenue.
    
The following are brief descriptions of the Company's reportable segments, each of which operates throughout the U.S.:

Renewables Segment

    The Renewables segment specializes in a range of services for the power delivery, solar, wind and battery storage markets that includes design, procurement, construction, restoration, and maintenance.

Specialty Civil Segment

    The Specialty Civil segment specializes in a range of services that include:

Heavy civil construction services such as road and bridge construction, specialty paving, sports field development, industrial maintenance, outsourced contract mining and heavy hauling.

Environmental remediation services such as site development, environmental site closure, and coal ash management.
Rail infrastructure services such as planning, design, procurement, construction and maintenance of major railway and intermodal facilities.

Segment Revenue

    Revenue by segment was as follows for the periods indicated:
Three Months Ended March 31,
(in thousands)20222021
SegmentRevenue% of Total RevenueRevenue% of Total Revenue
Renewables$243,614 67.7 %$180,374 65.3 %
Specialty Civil116,481 32.3 %96,038 34.7 %
  Total revenue$360,095 100.0 %$276,412 100.0 %

Segment Gross Profit

    Gross profit by segment was as follows for the periods indicated:
Three Months Ended March 31,
(in thousands)20222021
SegmentGross ProfitGross Profit MarginGross ProfitGross Profit Margin
Renewables$1,301 0.5 %$12,180 6.8 %
Specialty Civil2,529 2.2 %4,361 4.5 %
  Total gross profit$3,830 1.1 %$16,541 6.0 %


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Note 11. Joint Ventures

On May 22, 2019, the Company formed a joint venture with another construction company for purposes of designing and constructing an expansion of a major railway. The joint venture does not meet the qualifications of a VIE, and the Company records its share of the joint venture's results and balances within the Specialty Civil segment using the proportionate consolidation method at 25% ownership. The joint venture's balances consisted of the following as of the dates indicated:

(in thousands)March 31, 2022December 31, 2021
Assets
Cash$9,049 $8,850 
Accounts receivable367 874 
Contract assets2,919 2,796 
Liabilities
Accounts payable$2,161 $2,591 
Contract liabilities7,458 7,353 
Equity$2,716 $2,576 
Three Months Ended March 31,
20222021
Revenue$1,123 $4,501 
Cost of revenue983 4,501 



Note 12. Related Party Transactions

On August 2, 2021, in connection with a series of equity transactions, the Company entered into a Stockholders’ Agreement with the Ares Parties. Pursuant to the Stockholders’ Agreement:

The Ares Parties are entitled to designate two members of the Company's Board under certain circumstances, as defined in the Stockholders' Agreement.

The Ares Parties agreed to certain restrictions regarding, among other matters, (i) transfers of common stock and (ii) taking certain actions regarding the Board's composition.

The Ares Parties agreed to cause all voting securities to be present at any annual or special meeting in which directors are to be elected, to vote such securities either as recommended by the Board, or in the same proportions as votes cast by other voting securities with respect to director nominees or other nominees and in favor of any director nominee of the Ares Parties, and not to vote in favor of a change of control transaction pursuant to which the Ares Parties would receive consideration that is different in amount or form from other stockholders unless approved by the Board.

The Ares Parties are afforded reasonable access to the Company's books and records for so long as the Ares Parties have a right to designate a director to the Board.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

    This Quarterly Report on Form 10-Q (this "Quarterly Report") contains 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 (the “Exchange Act”). The forward-looking statements can be identified by the use of forward-looking terminology, including “may,” “should,” “likely,” “will,” “believe,” “expect,” “anticipate,” “estimate,” “forecast,” “seek,” “target,” “continue,” “plan,” “intend,” “project,” or other similar words. Other than statements of historical fact included in this Quarterly Report, all statements regarding expectations for future financial performance, business strategies, expectations for our business, future operations, liquidity positions, availability of capital resources, financial position, estimated revenues and losses, projected costs, prospects, plans, objectives and beliefs of management are forward-looking statements.

    These forward-looking statements are based on information available as of the date of this Quarterly Report and our management’s current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot give any assurance that such expectations will prove correct. Forward-looking statements should not be relied upon as representing our views as of any subsequent date. As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Factors that could cause actual results to differ include:

potential risks and uncertainties relating to COVID-19 (including new and emerging strains and variants), including the geographic spread, the severity of the disease, the scope and duration of the COVID-19 pandemic, actions that may be taken by governmental authorities to contain the COVID-19 pandemic or to mitigate its impact, and the potential negative impacts of COVID-19 on permitting and project construction cycles, the U.S. economy and financial markets;
supply chain and labor market disruptions;
the general impact of inflationary market pressures on labor markets, material costs and availability, the future availability of credit and the ability of our customers to proceed with previously funded projects;
availability of commercially reasonable and accessible sources of liquidity and bonding;
our ability to generate cash flow and liquidity to fund operations;
the timing and extent of fluctuations in geographic, weather and operational factors affecting our customers, projects and the industries in which we operate;
our ability to identify acquisition candidates and integrate acquired businesses;
our ability to grow and manage growth profitably;
the possibility that we may be adversely affected by economic, business, and/or competitive factors;
market conditions, technological developments, regulatory changes or other governmental policy uncertainty that affects us or our customers;
our ability to manage projects effectively, as well as the ability to accurately estimate the costs associated with our fixed price and other contracts, including any material changes in estimates for completion of projects;
the effect on demand for our services and changes in the amount of capital expenditures by customers due to, among other things, economic conditions, commodity price fluctuations, the availability and cost of financing, and customer consolidation;
the ability of customers to terminate or reduce the amount of work on short or no notice;
customer disputes related to the performance of services;
disputes with, or failures of, subcontractors to deliver agreed-upon supplies or services in a timely fashion;
our ability to replace non-recurring projects with new projects;
the impact of U.S. federal, local, state, foreign or tax legislation and other regulations affecting the renewable energy industry and related projects and expenditures;
the effect of state and federal regulatory initiatives, including costs of compliance with existing and future safety and environmental requirements;