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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-K
 
     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2020
OR
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO ________

COMMISSION FILE NUMBER: 001-37796

Infrastructure and 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 Class Trading Symbol(s)Name of Exchange on Which Registered
Common Stock, $0.0001 par value IEAThe NASDAQ Stock Market LLC
Warrants for Common StockIEAWWThe NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ¨ Yes þ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ¨ Yes þ No
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. þ 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). þ 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 þ 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes þ No

The aggregate market value of the registrant’s outstanding Common Stock held by non-affiliates of the registrant computed by reference to the price at which the Common Stock was last sold as of the last business day of the registrant’s most recently completed second fiscal quarter was approximately $43.5 million on June 30, 2020. The registrant, solely for purposes of this required presentation, deemed the Board of Directors, Executive Officers and Infrastructure and Energy Alternatives, LLC as affiliates.

Number of shares of Common Stock outstanding as of the close of business on March 8, 2021: 22,905,031.
Portions of the registrant's definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A for the 2020 annual meeting of shareholders is incorporated by reference in Part III of this Form 10-K to the extent stated herein.



Infrastructure and Energy Alternatives, Inc.
Table of Contents
Page




Forward-Looking Statements    
    This Annual Report on Form 10-K (“Annual Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) 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 Annual Report, all statements regarding expectations for future financial performance, business strategies, expectations for our business, future operations, 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 Annual 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. Some factors that could cause actual results to differ include:
potential risks and uncertainties relating to COVID-19, 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 treat its impact, and the potential negative impacts of COVID-19 on permitting and project construction cycles, the U.S. economy and financial markets;
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 and in accordance with management estimates, 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, or in some cases, the prices paid for services, 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;
fluctuations in equipment, fuel, materials, labor and other costs;
our beliefs regarding the state of the renewable energy market generally; and
the “Risk Factors” described in this Annual Report, and in our quarterly reports, other public filings and press releases.
We do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
    
3


PART I

ITEM 1. BUSINESS

Business Overview

    Infrastructure and Energy Alternatives, Inc., a Delaware corporation (‘‘IEA’’, the ‘‘Company’’, ‘‘we’’, ‘‘us’’, or ‘‘our’’) is a holding company that, through various subsidiaries, is a leading diversified infrastructure construction company with specialized energy and heavy civil expertise throughout the United States (“U.S.”). We were founded in 1947 as White Construction and we became a public company in March 2018 when we merged with a special purpose acquisition company. Our Common Stock trades on the NASDAQ Capital Market under the symbol ‘‘IEA’’.

The Company specializes in providing complete engineering, procurement and construction (“EPC”) services throughout the U.S. for the renewable energy, traditional power and civil infrastructure industries. In 2019, Engineering News-Record (“ENR”) ranked IEA as the 2nd leading provider of wind EPC services based on revenue. These services include the design, site development, construction, installation and restoration of infrastructure. We believe we have the ability to continue to expand these services to leverage our expertise and relationships in the wind energy business to provide additional infrastructure solutions to the clean energy markets.

The acquisitions we made in 2018 have expanded our construction capabilities and geographic footprint in the areas of environmental remediation, industrial maintenance, specialty paving, heavy civil and rail infrastructure construction, creating a diverse national platform of specialty construction capabilities. See Note 2. Merger and Acquisitions in the notes to the audited consolidated financial statements for more information on the acquisitions.

Reportable Segments

    The Company operates its business in two reportable segments:

Renewables Segment

    The Renewables segment operates throughout the U.S. and specializes in a range of services that include full EPC project delivery, design, site development, construction, installation and maintenance of infrastructure services for the wind and solar industries.

We have maintained a heavy focus on construction of renewable power production capacity as renewable energy, particularly from wind and solar, has become widely accepted within the electric utility industry and has become a cost-effective solution for the creation of new generating capacity.

Specialty Civil Segment

    The Specialty Civil segment operates throughout the U.S. and specializes in a range of services that include:

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

Heavy civil construction services such as road and bridge construction, specialty paving, industrial maintenance and other local, state and government projects.

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Strategy

The key elements of our business strategy are as follows:
    
Retention of strong relationships with our customers to expand services offered — We believe that we have strong, long-term relationships with each of our customers and have historically worked together with them to meet their needs. By leveraging our established relationships with these customers, we intend to provide expanded products and services that will continue to diversify our revenue streams and assist our customers with their business strategies.

    Maintain Operational Excellence — We have a continual focus on maintaining operational excellence, which includes the following:

Quality - We believe in satisfying our clients, mitigating risk, and driving improvement by performing work right the first time.

Technical Expertise - We have an established reputation for safe, high quality performance, reliable customer service and technical expertise in constructing technically demanding projects.

Safety - We believe the safety of our employees, the public and the environment is a moral obligation as well as good business. By identifying and concentrating resources to address jobsite hazards, we continually strive to reduce our incident rates and the costs associated with accidents.

Productivity - We strive to use our resources efficiently to deliver work on time and on budget.

    Ownership of Equipment — Many of our services are equipment intensive and certain key equipment used by us is specialized or customized for our businesses. The cost of construction equipment, and in some cases the availability of construction equipment, provides a significant barrier to entry into several of our businesses. We believe that our ownership and if needed, ability to lease a large and varied construction fleet at a reasonable cost, enables us to compete more effectively by ensuring availability and maximizing returns on investment of the equipment.

Maintain a strong balance sheet and an optimal capital structure — We believe that continued focus on our capital structure provides our customers, our lenders, and our bonding companies assurance of our financial capabilities. We will continue to focus on optimizing our capital structure in order to find the best mix of debt and equity financing that can maximize the Company's market value while minimizing our cost of capital. We maintain a revolving credit facility to provide letter of credit capability and, if needed, to augment our liquidity needs.

Future Strategic Acquisitions and Arrangements — We will continue to pursue selected and opportunistic acquisitions, that fit our strategy of acquiring businesses with complementary cultures, niche market capabilities, excellent relationships with blue chip customers and strong, proven management teams that are retained post acquisition.

Customers

    We have longstanding customer relationships with many established companies in the renewable energy, thermal power, environmental remediation, civil and industrial power industries, with a recurring base of blue-chip utility customers, as well as with original equipment manufacturers that produce the equipment for our business. We have completed renewable projects for top U.S. developers and owners, rail infrastructure projects with top tier railroads and heavy civil construction projects with many government agencies.

    Although we are not dependent upon any one customer in any year, a relatively small number of repeat customers constitute a substantial portion of our total revenues. Accordingly, our senior management is responsible for developing and maintaining existing relationships with customers to secure additional projects and increase revenue from our current customer base. We believe that our strategic relationships with customers will result in future opportunities. Our management is also focused on pursuing growth opportunities with prospective new customers.

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    The Company had the following approximate revenue and accounts receivable concentrations, net of allowances, for the periods ended:
Revenue %Accounts Receivable %
Year Ended December 31,December 31,
20202019201820202019
Company A (Renewables Segment)**21.0 **
Company B (Specialty Civil Segment)*10.9 ***
———
* Amount was not above 10% threshold.

    Our work is generally performed pursuant to contracts for specific projects or jobs that require the construction or installation of an entire complex of specified units within an infrastructure system. Generally, customers are billed monthly throughout the completion of work on a project; however, some contracts provide for additional billing upon the achievement of specific completion milestones, which may increase the billing period to more than one month. Many contracts may include retainage provisions under which, generally, from 5% to 10% of the contract price is withheld until the work has been completed and accepted by the customer.

    We believe that our industry experience, technical expertise and reputation for customer service, as well as the relationships developed between our customers and our senior management and project management teams are important to our being retained by our customers.

Backlog

    Estimated backlog represents the amount of revenue we expect to realize in 2021 and beyond from the uncompleted portions of existing construction contracts, including new contracts under which work has not begun and awarded contracts for which the definitive project documentation is being prepared, as well as revenue from change orders and renewal options. Estimated backlog for work under fixed price contracts and cost-reimbursable contracts is determined based on historical trends, anticipated seasonal impacts, experience from similar projects and estimates of customer demand based on communications with our customers. These contracts are included in backlog based on the estimated total contract price upon completion.

    The following table summarizes our backlog by segment for December 31:

(in millions)
SegmentsDecember 31, 2020December 31, 2019
Renewables$1,513.4 $1,582.5 
Specialty Civil556.1 588.7 
  Total$2,069.5 $2,171.2 

We expect to realize approximately $1,628.9 million of our estimated backlog during 2021 and $440.6 million during 2022 and beyond.

    Based on historical trends in the Company’s backlog, we believe awarded contracts to be firm and that the revenue for such contracts will be recognized over the life of the project. Timing of revenue for construction and installation projects included in our backlog can be subject to change as a result of customer delays, regulatory factors, COVID-19 pandemic, weather and/or other project-related factors. These changes could cause estimated revenue to be realized in periods later than originally expected, or not at all. In the past, we have occasionally experienced postponements, cancellations and reductions on construction projects due to market volatility and regulatory factors. There can be no assurance as to our customers’ requirements or the accuracy of our estimates. As a result, our backlog as of any particular date is an uncertain indicator of future revenue and earnings and may not result in actual revenue or profits.

    Backlog is not a term recognized under U.S. GAAP, although it is a common measurement used in our industry. Backlog also differs from the amount of our remaining performance obligations, which are described in Note 1 - Business, Basis of Presentation and Significant Accounting Policies in the notes to the consolidated financial statements. Additionally, our methodology for determining backlog may not be comparable to the methodologies used by others. See
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‘‘Risk Factors’’ for a discussion of the risks associated with our backlog. As of December 31, 2020, total backlog differed from the amount of our remaining performance obligations primarily due to the inclusion of contracts that were awarded but not yet fully executed. 

Competition

    We compete with a number of companies in the markets in which we operate, ranging from small local independent companies to large national firms, and some of our customers employ their own personnel to perform some of the services we provide.
    
    The primary factors influencing competition in our industry are price, reputation, quality and delivery, relevant expertise, adequate financial resources, geographic presence, high safety ratings and a proven track record of operational success. We believe that our national platform, track record of completion, relationships with vendors, strong safety record and access to skilled labor enables us to compete favorably in all of these factors. We also believe that our ability to provide unionized and non-unionized workforces across a national footprint allows us to compete for a broad range of projects. While we believe our customers consider a number of factors when selecting a service provider, they award most of their work through a bid process. We believe our safety record, experience, quality of service and price are often principal factors in determining which service provider is selected.

Seasonality

    Our revenues and results of operations can be subject to seasonal and other variations. These variations are influenced by weather, customer spending patterns, bidding seasons, receipt of required regulatory approvals, permits and rights of way, project timing and schedules and holidays. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations-Impact of Seasonality and Cyclical Nature of Business.’’

Safety and Insurance/Risk Management

    We strive to instill and enforce safe work habits in our employees, and we require that our employees participate in training programs relevant to their employment, including all those required by law. We evaluate employees in part based upon their safety performance and the safety performance of the employees they supervise. Our business units have established robust safety programs to encourage, monitor and improve compliance with safety procedures and regulations including, behavioral based safety, jobsite safety analysis, site-specific safety orientation, subcontractor orientation, site safety audits, accident and incident safety investigations, OSHA 30-hour and 10-hour training, drug and alcohol testing and regular trainings in fall protection, confined spaces, crane rigging and flagman, first aid, CPR and AED, among others.

    Our business involves the use of heavy equipment and exposure to potentially dangerous workplace conditions. While we are committed to operating safely and prudently, we may be subject to claims by employees, customers and third parties for property damage and personal injuries that occur in connection with our work. We maintain insurance policies for worker’s compensation, employer liability, automobile liability, general liability, inland marine property and equipment, professional and pollution liability, excess liability, and director and officers’ liability. See Note 9. Commitments and Contingencies in the notes to the audited consolidated financial statements.

    Our business may subject us to the risk of adverse site conditions and unfavorable weather. While we mitigate these risks contractually to the extent possible, market conditions prevent us from fully passing these risks to our customers, and there is not a robust insurance market to cover these risks. While we have evaluated the feasibility of insurance products to mitigate weather risk, we do not believe that the current insurance market offers commercially practicable solutions to protect the Company against significant losses caused by adverse weather.

Suppliers and Materials

    Under many of our contracts, our customers provide the necessary materials and supplies for projects, such as wind turbines, and we are responsible for the installation, but not the cost or warranty of those materials. Under certain other projects, we purchase the necessary materials and supplies on behalf of our customers from third-party providers. We are not dependent upon any one vendor and have not experienced significant difficulty in obtaining project-related materials or supplies as and when required for the projects we manage.

    We utilize independent contractors to assist on projects and to help manage our work flow. Our independent
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contractors typically provide their own vehicles, tools and insurance coverage.

    We bear some risk of increases in the price of materials and supplies used in the performance of our work, such as aggregate, reinforced steel, cable, and fuel. These risks are managed contractually, by entering into contracts with suppliers that fix the price paid by the Company within the budget established for a project, or by passing the risk of commodity cost increases to the customer.
Regulation

Our operations are subject to various federal, state, and local laws and regulations including:

licensing, permitting and inspection requirements applicable to contractors, electricians and engineers;
regulations relating to worker safety and environmental protection;
permitting and inspection requirements applicable to construction projects;
wage and hour regulations;
regulations relating to transportation of equipment and materials, including licensing and permitting     requirements;
building and electrical codes; and
special bidding, procurement and other requirements on government projects.

We believe we have all material licenses and permits needed to conduct operations and that we are in material compliance with applicable regulatory requirements. However, we could incur significant liabilities if we fail to comply with applicable regulatory requirements.

Environmental and Climate Change Matters

    We are also subject to numerous environmental laws, including the handling, transportation and disposal of non-hazardous and hazardous substances and wastes, as well as emissions and discharges into the environment, including discharges into air, surface water, groundwater and soil. We also are subject to laws and regulations that impose liability and cleanup responsibility for releases of hazardous substances into the environment.

    The potential impact of climate change on our operations is highly uncertain. Climate change may result in, among other things, changes in rainfall patterns, storm patterns and intensity and temperature levels. Our operating results are significantly influenced by weather and major changes in historical weather patterns could significantly impact our future operating results. For example, if climate change results in significantly more adverse weather conditions in a given period, we could experience reduced productivity and increases in certain other costs, which could negatively impact revenues and gross margins.

Production Tax Credit (the ‘‘PTC’’) and Investment Tax Credit (‘‘ITC’’)

    In light of changes in federal government priorities and the cost-competitiveness of wind and solar power production, certain of the tax credits for production of renewable energy are phasing out. The Consolidated Appropriations Act of 2016 (‘‘CAA’’), which contains certain federal tax incentives applicable to the renewable energy industry, provided for the gradual elimination of certain of these incentives. In December 2020, the federal government implemented an agreement that extended lapsed and expiring tax breaks. The extension provides a one year extension of the PTC for wind projects at a 60% level for projects that begin construction on or before December 31, 2021 and a two year extension of 26% ITC for projects that begin construction before January 1, 2023 and 22% ITC for projects that begin construction before January 1, 2024 for all solar projects placed into service prior to December 31, 2025.

Employees

As of December 31, 2020, we employed 745 salaried employees and 2,627 hourly employees. The total number of hourly personnel employed is subject to the volume of specialty services and construction work in progress.

We believe that our employees are the most valuable resource in successfully completing our projects. Our ability to maintain sufficient, continuous work for hourly employees helps us to maintain a stable workforce with a loyalty to and an understanding of our policies and culture and contributes to our strong performance, safety and quality record. Our talent acquisition team uses internal and external resources to recruit highly skilled and talented workers, and we encourage employee referrals for open positions. In addition, we have partnerships with technical schools where we recruit and hire craft employees.
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We employ a dynamic mix of people to create the strongest company possible. Our policy forbids discrimination in employment on the basis of age, culture, gender, national origin, sexual orientation, physical appearance, race or religion. We are an inclusive, diverse company with people of all backgrounds, experience, culture, styles and talents.

As part of our compensation philosophy, we believe that we must offer and maintain market competitive total rewards programs for our employees in order to attract and retain superior talent. In addition to base wages, additional programs include annual bonus opportunities, a Company matched 401(k) Plan, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, flexible work schedules, and employee assistance programs.

We strive to develop and sustain a skilled labor advantage by providing on and off-site training programs, project management training, and leadership development programs. Our leadership development program is designed to further develop each participant’s leadership skills and requires program participants to challenge themselves and their peers as they progress.

We are committed to the health, safety and wellness of our employees, and we pride ourselves on above-average workplace safety. We track and maintain several key safety metrics, which senior management reviews monthly, and we evaluate management on their ability to provide safe working conditions on job sites and to create a safety

Available Information

    Our principal executive offices are located at 6325 Digital Way, Suite 460, Indianapolis, Indiana 46278, and our telephone number is (800) 688-3775. Our website is located at www.iea.net. We make available our periodic reports and other information filed with or furnished to the Securities and Exchange Commission (the “SEC”), including our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, proxy statements, and all amendments to those reports, free of charge through our website, as soon as reasonably practicable after those reports and other information are electronically filed with or furnished to the SEC. Any materials filed with the SEC may be read and copied at the SEC’s website at www.sec.gov.


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ITEM 1A. RISK FACTORS

Risk Factor Summary

Below is a summary of the principal factors that make an investment in IEA and our Common Stock speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below, after this summary, and should be carefully considered, together with other information in this Annual Report on Form 10-K and our other filings with the SEC before making an investment decision regarding IEA and our Common Stock.

Risks Related to IEA:

Our business is seasonal and is affected by adverse weather conditions and the spending patterns of our customers, exposing us to variable quarterly results.

Our failure to recover adequately on claims against project owners, subcontractors or suppliers for payment or performance could have a material adverse effect on our financial results.

The ultimate effects of the current COVID-19 pandemic are unknown and evolving, and could result in negative effects on our business, financial condition, results of operations and prospects.

Our business is affected by delays, which could increase our costs and reduce profitability.

We may be unable to obtain sufficient bonding capacity to support certain service offerings, and the need for performance and surety bonds may reduce our availability under our Third A&R Credit Agreement.

Our business is subject to physical hazards that could result in substantial liabilities for us which could materially and adversely affect our business, financial conditions, profitability and growth prospects.

We are self-insured against certain potential liabilities.

Our failure to recover adequately on claims against project owners, subcontractors or suppliers for payment or performance could have a material adverse effect on our financial results.

Acquisition activity presents certain risks to our business, operations and financial positions, and we may not realize the financial and strategic goals contemplated at the time of a transaction.

If we are unable to attract and retain qualified and skilled employees we will be unable to operate efficiently, which could reduce our revenue, profitability and liquidity.

Our business benefits from economic incentives and governmental policies. A significant change in these incentives and policies could adversely affect our business, financial conditions, results of operations, cash flows and growth prospects.

We derive a portion of our revenues from government contracts which pose risks of inadequate funding and competitive bidding processes,

Amounts included in our backlog may not result in actual revenue or translate into profits.

Many of our customers are regulated by federal, state and local government agencies, and the addition of new regulations or changes to existing regulations may adversely impact the demand and profitability of our services.

We recognize revenue from installation/construction fixed price contracts using the cost-to cost input method (formerly known as percentage-of-completion method); and variations of actual results from our assumptions may reduce our profitability.

We derive a significant portion of our revenue from a concentrated base of customers, and the loss of a small number of our significant customers, due to decreased demand or otherwise, could impair our financial performance.

Certain of our businesses have employees subject to collective bargaining agreements; any related obligations to such agreements could adversely affect our business, financial condition, profitability and growth prospects.
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Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our financial condition and results of operations.

We rely on information, communication and data systems in our operations, and systems and information technology disruptions could adversely affect our ability to operate and could result in harm to our reputation.

Risks Related to Our Capital Structure

We have a significant amount of debt, and our substantial indebtedness could adversely affect our business, financial condition, results of operations and our ability to meet our payment obligations.

Our Third A&R Credit Agreement, the Series A Preferred stock and Series B Preferred Stock impose restrictions on us that may prevent us from engaging in transactions that might benefit us.

There may be future sales of our Common Stock or other dilution of our equity that could adversely affect the market price of our Common Stock.

Mohsin Meghji has significant ability to influence corporate decisions.

Ares and the Ares Parties may have the ability to influence certain corporate decisions through their ownership of Common Stock obtainable upon conversion of the Series A Preferred Stock and the exercise of rights, including under the respective certificates of designation for the Series A Preferred Stock and Series B Preferred Stock.

Our liquidity remains seasonally constrained and we could require additional sources of liquidity in the future to fund our operations and service our indebtedness.

Our quarterly operating results may fluctuate significantly and could fall below the expectations of analysts and investors due to certain factors, some of which are beyond our control, resulting in a decline in our stock price.

Our Certificate of Incorporation, Bylaws and certain provisions of Delaware law contain certain anti-takeover provisions that could impair a takeover attempt, even if a change of control would be of benefit to our stockholders.

The terms of our Series A Preferred Stock and Series B Preferred Stock reduce the likelihood of dividends payments on our Common Stock, and may otherwise adversely affect the Common Stock.

Our Common Stockholders may face substantial dilution as a result of warrants.

The Series A Preferred Stock may result in substantial dilution to holders of our Common Stock.

Our stock price has experienced significant volatility.

Risks Related to Our Industry and Our Customers’ Industries

Economic downturns could reduce capital expenditures in the industries we serve, which could result in decreased demand for our services.

Our industry is highly competitive, which may reduce our market share and harm our financial performance.

Our customers may be adversely affected by market conditions and economic downturns, which could impair their ability to pay for our services.

Risks Related to IEA

Our business is seasonal and is affected by adverse weather conditions and the spending patterns of our customers, exposing us to variable quarterly results.
 
    Some of our customers reduce their expenditures and work order requests towards the end of the calendar year. Adverse weather conditions, particularly during the fall and winter seasons, can also affect our ability to perform outdoor
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services in certain regions of North America. As a result, we generally experience reduced revenue in the first quarter of each calendar year. Natural catastrophes such as hurricanes or other severe weather could also have a negative effect on the economy overall and on our ability to perform outdoor services in affected regions or utilize equipment and crews stationed in those regions, which could negatively affect our results of operations, cash flows and liquidity.
 
    Our results for the year ended December 31, 2019 and 2018, reflect the effect of multiple severe weather events on our wind business that began late in the third quarter of 2018 and were completed in the second quarter of 2019. These weather conditions had a significant impact on the construction of six wind projects across South Texas, Iowa, and Michigan, resulting in additional labor, equipment and material costs as well as change orders.

    The cumulative impact of these severe weather events negatively impacted our liquidity during 2019 and, combined with the inability to timely recover excess costs from these adverse weather conditions required us to seek additional financing and to renegotiate our senior credit facility. There can be no assurance that our liquidity will not be negatively impacted in the future due to significant adverse weather conditions.
 
Our failure to recover adequately on claims against project owners, subcontractors or suppliers for payment or performance could have a material adverse effect on our financial results.
 
    We occasionally bring claims against project owners for additional costs that exceed the contract price or for amounts not included in the original contract price. Similarly, we present change orders and claims to our subcontractors and suppliers. If we fail to properly document the nature of change orders or claims, or are otherwise unsuccessful in negotiating a reasonable settlement, we could incur reduced profits, cost overruns or a loss on the project. These types of claims can often occur due to matters such as owner-caused delays, changes from the initial project scope and adverse conditions, which result in additional cost, both direct and indirect, or from project or contract terminations. From time to time, these claims can be the subject of lengthy and costly proceedings, and it is often difficult to accurately predict when these claims will be fully resolved. When these types of events occur and unresolved claims are pending, we may invest significant working capital in projects to cover cost overruns pending the resolution of the relevant claims. A failure to promptly recover on these types of claims could have a material adverse effect on our liquidity and financial results.

The ultimate effects of the current COVID-19 pandemic are unknown and evolving, and could result in negative effects on our business, financial condition, results of operations and prospects.

The COVID-19 pandemic is a constantly evolving situation that has adversely impacted economic activity and conditions in the United States and worldwide. In particular, efforts to control the spread of COVID-19 have led to reoccurring shutdowns and stay-at-home orders, stock price declines, employee layoffs, and governmental programs to support the economy.

The COVID-19 pandemic could affect us in a number of other ways, including but not limited to:

Delays in receiving permits resulting in unanticipated changes to construction schedules;
Inabilities to properly staff our construction projects due to quarantines and stay at home orders;
Inabilities of customers to fund project obligations due to liquidity issues;
Termination or delay in project construction at our customers’ discretion due to financial uncertainties;
Inability of, or delays by, our subcontractors to deliver equipment and services;
Restrictions on our ability to obtain new business if our customer base is financially constrained;
Inability to obtain bonding from our sureties due to tightening of credit markets; and
Decrease in demand for civil construction resulting from corresponding decreases in federal, state and local budgets.

Each of the foregoing could cause project delays, force majeure events and project terminations, which could negatively impact our ability to recognize revenues and bill our customers for current costs. In addition, if our customers are unable to finance new projects as a result of their liquidity issues during and in the aftermath of the pandemic, our business outlook will be negatively impacted. A prolonged continuation of the COVID-19 pandemic, or a resurgence of the pandemic even if the current pandemic is significantly reduced, could also result in additional impacts to our business, financial condition, results of operations and prospects. The ultimate effects of the COVID-19 pandemic are unknown at this time. We are continuing to monitor developments but cannot predict at this time whether COVID-19 will have a material impact on our business, financial condition, liquidity or results of operations.


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Our business may be affected by delays, which could increase our costs and reduce profitability.

Our projects involve challenging engineering, procurement and construction phases that may occur over extended time periods and that may involve many parties. Delays on a particular project can arise from a number of events involving the customer, third parties and us, including delays in design and engineering; delays or difficulties in obtaining equipment and materials; schedule changes; failures to timely obtain permits or rights-of-way or to meet other regulatory requirements; delays due to epidemics and pandemics (including COVID-19); weather-related delays; and other governmental, market and political events, many of which are beyond our control. A significant amount of equipment used in our projects is sourced from China. The current COVID-19 outbreak could cause meaningful delays in owner and third party provided equipment being manufactured and shipped out of China. Excessive delays in connection with the COVID-19 outbreak could result in project delays and increased costs.

We perform work under a variety of conditions, including, but not limited to, challenging and hard to reach terrain and difficult site conditions. Some of our contracts require that we assume the risk should actual site conditions vary from those expected, and these projects may be at increased risk for delays.

Delays may result in the cancellation or deferral of project work (including through a customer and or third party’s assertion of force majeure, or our assertion of force majeure), which could lead to a decline in revenue from lost project work, or, for project deferrals, could cause us to incur costs which are not reimbursable by the customer, and may lead to personnel shortages on other projects scheduled to commence at a later date. In some cases, delays and additional costs may be substantial, and we may be required to cancel a project and/or compensate the customer for the delay. We may not be able to recover any of such costs.  Any such delays or cancellations or errors or other failures to meet customer expectations could result in damage claims substantially in excess of the revenue associated with a project. Delays or cancellations could also negatively impact our reputation or relationships with our customers, which could adversely affect our ability to secure new contracts and our business, financial condition, results of operations, profitability, cash flows and growth prospects.

We may be unable to obtain sufficient bonding capacity to support certain service offerings, and the need for performance
and surety bonds may reduce our availability under our Third A&R Credit Agreement.
 
    Some of our contracts require performance and payment bonds. If we are not able to renew or obtain a sufficient level of bonding capacity in the future, we may be precluded from being able to bid for certain contracts or successfully contract with certain customers. In addition, even if we are able to successfully renew or obtain performance or payment bonds, we may be required to post letters of credit or other collateral security in connection with the bonds, which would only be obtainable if we have sufficient availability under our Third A&R Credit Agreement and, if available, would reduce availability for borrowings under our Third A&R Credit Agreement. Furthermore, under standard terms in the surety market, sureties issue bonds on a project-by-project basis and can decline to issue bonds at any time or require the posting of additional collateral at any time. If we were to experience an interruption or reduction in the availability of bonding capacity as a result of these or any other reasons, we may be unable to compete for or work on certain projects that require bonding.

Our business is subject to physical hazards that could result in substantial liabilities and weaken our financial condition.
 
    Construction projects undertaken by us expose our employees to heavy equipment, mechanical failures, transportation accidents, adverse weather conditions and the risk of damage to equipment and property. These hazards can cause personal injuries and loss of life, severe damage to or destruction of property and equipment and other consequential damages and could lead to suspension of operations and large damage claims which could, in some cases, substantially exceed the amount we charge for the associated services. In addition, if serious accidents or fatalities occur, or if our safety records were to deteriorate, we may be restricted from bidding on certain work and obtaining new contracts and certain existing contracts could be terminated. Our safety processes and procedures are monitored by various agencies and ratings bureaus. The occurrence of accidents in our business could result in significant liabilities, employee turnover, increase the costs of our projects, or harm our ability to perform under our contracts or enter into new customer contracts, all of which could materially adversely affect our business, financial condition, results of operations, profitability, cash flows and growth prospects.
 
    Our experience modification rate, a measure of our history and safety record as compared to other businesses in our industry, was 0.58 and our total recordable incident rate was 0.61 in 2020, both of which were significantly below the industry averages of 1.0 and 2.8, respectively, reported by the U.S. Department of Labor and U.S. Bureau of Labor Statistics. While these standards are still below industry averages, we experienced a fatality at one of our work sites in 2018 and there is no guarantee, based on the hazards discussed above, that we can maintain these averages.

 
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We are self-insured against certain potential liabilities.
 
    Although we maintain insurance policies with respect to employer’s liability, general liability, auto and workers compensation claims, those policies are subject to deductibles or self-insured retention amounts of up to $500,000 per occurrence. We are primarily self-insured for all claims that are less than the amount of the applicable deductible/self-insured retention. In addition, for health insurance coverage for our employees not part of a collective bargaining agreement, we provide employee health care benefit plans. Our health insurance plans have a self-insurance component up to specified deductibles per individual per year.
 
    Our insurance policies include various coverage requirements, including the requirement to give appropriate notice. If we fail to comply with these requirements, our coverage could be denied.
 
    Projected losses under our insurance programs are accrued based upon our estimates of the ultimate liability for claims reported and an estimate of claims incurred but not reported. Insurance liabilities are difficult to assess and estimate due to unknown factors, including the severity of an injury, the extent of damage, the determination of our liability in proportion to other parties and the number of incidents not reported. The accruals are based upon known facts and historical trends.
 
Acquisition activity presents certain risks to our business, operations and financial position, and we may not realize the financial and strategic goals contemplated at the time of a transaction.
 
    We expect that the acquisitions will be an important part of our long-term growth strategy. Successful execution following the closing of an acquisition is essential to achieving the anticipated benefits of the transaction. We have made acquisitions to expand into new markets and our acquisition strategy depends on our ability to complete and integrate the acquisitions. Mergers and acquisitions are inherently risky, and any mergers and acquisitions that we complete may not be successful. The process of integrating an acquired company’s business into our operations and investing in new technologies is challenging and may result in expected or unexpected operating or compliance challenges, which may require significant expenditures and a significant amount of our management’s attention that would otherwise be focused on the ongoing operation of our business. The potential difficulties or risks of integrating an acquired company’s business include, among others:

the effect of the acquisition on our financial and strategic positions and our reputation;

risk that we fail to successfully implement our business plan for the combined business;

risk that we are unable to obtain the anticipated benefits of the acquisition, including synergies or economies of scale;

risk that we are unable to complete development and/or integration of acquired technologies;

risk that the market does not accept the integrated product portfolio;

challenges in reconciling business practices or in integrating product development activities, logistics or information technology and other systems;

challenges in reconciling accounting issues, especially if an acquired company utilizes accounting principles different from those we use;

retention risk with respect to key customers, suppliers and employees and challenges in retaining, assimilating and training new employees;

potential failure of the due diligence processes to identify significant problems, liabilities or other shortcomings or challenges of an acquired company, which could result in unexpected litigation, regulatory exposure, financial contingencies and known and unknown liabilities; and

challenges in complying with newly applicable laws and regulations, including obtaining or retaining required approvals, licenses and permits.

    Our acquisitions may also result in the expenditure of available cash and amortization of expenses any of which could have a material adverse effect on our operating results or financial condition. Investments in immature businesses with unproven track records and technologies have an especially high degree of risk, with the possibility that we may lose the value of our entire investments or incur additional unexpected liabilities. Large or costly acquisitions or investments may also
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diminish our capital resources and liquidity or limit our ability to engage in additional transactions for a period of time. All of the foregoing risks may be magnified as the cost, size or complexity of an acquisition or acquired company increases, or where the acquired company’s products, market or business are materially different from ours, or where more than one integration is occurring simultaneously or within a short period of time.
 
    In addition, in the future we may require significant financing to complete an acquisition or investment, whether through bank loans, raising of debt or otherwise. We cannot assure you that such financing options will be available to us on reasonable terms, or at all. If we are not able to obtain such necessary financing, it could have an impact on our ability to consummate a substantial acquisition or investment and execute our growth strategy. Alternatively, we may issue a significant number of shares as consideration for an acquisition, which would have a dilutive effect on our existing stockholders.
 
If we are unable to attract and retain qualified managers and skilled employees, we will be unable to operate efficiently, which could reduce our revenue, profitability and liquidity.
 
    Our business is labor intensive, and some of our operations experience a high rate of employee turnover. In addition, given the nature of the highly specialized work we perform, many of our employees are trained in, and possess, specialized technical skills that are necessary to operate our business and maintain productivity and profitability. At times of low unemployment rates in the areas we serve, it can be difficult for us to find qualified and affordable personnel. We may be unable to hire and retain a sufficiently skilled labor force necessary to support our operating requirements and growth strategy. Our labor and training expenses may increase as a result of a shortage in the supply of skilled personnel. We may not be able to pass these expenses on to our customers, which could adversely affect our profitability. Additionally, our business is managed by a number of key executive and operational officers and is dependent upon retaining and recruiting qualified management. Labor shortages, increased labor or training costs, or the loss of key personnel could materially adversely affect our business, financial condition, results of operations, profitability, cash flows and growth prospects.
 
The U.S. wind and solar industries benefit from tax and other economic incentives and political and governmental policies. A significant change in these incentives and policies could materially and adversely affect our business, financial condition, results of operations, cash flows and growth prospects.
 
The Consolidated Appropriations Act of 2016 (“CAA”) extended certain provisions of the Internal Revenue Code, which contains federal tax incentives applicable to the renewable energy industry, provided for the gradual elimination of certain of these incentives. Currently, the tax code provides that the production tax credit for wind projects (the ‘‘PTC’’) applies to qualifying projects for which the construction commencement date was prior to January 1, 2021. The PTC was reduced by 20% for 2018, has been reduced by 40% for 2019, and finally will be reduced by 60% for 2020, and by 40% for 2021. Similarly, a phase down rate of the investment tax credit (the ‘‘ITC’’), which is available in lieu of PTC, is available for wind projects: 30% ITC for projects commencing before 2017, 24% for projects commencing in 2017, 18% for projects commencing in 2018 and 12% for projects commencing in 2019, and 18% for projects commencing in 2020. Solar projects, however, will be eligible for an investment tax credit (the ‘‘Solar ITC’’) only. The Solar ITC is 30% for projects commencing prior to 2020 and will be reduced to 26% for projects commencing in 2020 and to 26% for projects commencing in 2021. After 2021, the Solar ITC will remain at 26% for projects that commence in 2022, but will be reduced to 22% for projects that commence in 2023. After 2023, the Solar ITC will permanently remain at 10% for projects that commence in 2024 and onwards.

In December 2020, there was a one year extension of the Production Tax Credit (“PTC”) at 60% for projects that begin construction on or before December 31, 2021 and a two year extension of 26% Solar Investment Tax Credit (“ITC”) to 2022 (22% credit extended through 2023).
 
    The PTC, ITC, and Solar ITC program provide material incentives to develop wind energy generation facilities and thereby impact the demand for our manufactured products and services. The increased demand for our products and services resulting from the credits and incentives may continue until such credits or incentives lapse. The failure of Congress to extend or renew these incentives beyond their current expiration dates could significantly delay the development of wind energy generation facilities and the demand for wind turbines, towers and related components. In addition, we cannot assure you that any subsequent extension or renewal of the PTC, ITC or Solar ITC program would be enacted prior to its expiration or, if allowed to expire, that any extension or renewal enacted thereafter would be enacted with retroactive effect. It is possible that these federal incentives will not be extended beyond their current expiration dates. Any delay or failure to extend or renew the PTC, ITC or Solar ITC program in the future could have a material adverse impact on our business, results of operations, financial performance and future development efforts.
 
    State renewable energy portfolio standards generally require state-regulated electric utilities to supply a certain proportion of electricity from renewable energy sources or devote a certain portion of their plant capacity to renewable energy
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generation. Typically, subject utilities comply with such standards by qualifying for renewable energy credits evidencing the share of electricity that was produced from renewable sources. Under many state standards, these renewable energy credits can be unbundled from their associated energy and traded in a market system allowing generators with insufficient credits to meet their applicable state mandate. These standards have spurred significant growth in the wind energy industry and a corresponding increase in the demand for our manufactured products. Currently, the majority of states and the District of Columbia have renewable energy portfolio standards in place and certain states have voluntary utility commitments to supply a specific percentage of their electricity from renewable sources. The enactment of renewable energy portfolio standards in additional states or any changes to existing renewable energy portfolio standards, or the enactment of a federal renewable energy portfolio standard or imposition of other greenhouse gas regulations may impact the demand for our products. We cannot assure you that government support for renewable energy will continue. The elimination of, or reduction in, state or federal government policies that support renewable energy could have a material adverse impact on our business, financial condition, results of operations, profitability, cash flows and growth prospects.

Contracts with federal, state and local governments pose additional risks, including lack of funding, onerous terms, and competitive bidding processes.

    We derive a portion of our revenues from contracts with federal, state and local governments and their agencies and departments. These contracts are directly affected by changes in governmental spending and availability of adequate funding. Factors that could affect current and future governmental spending include:

policy or spending changes implemented by current administrations, departments or other government agencies;

governmental shutdowns, failure to pass budget appropriations, continuing funding resolutions or other budgetary decisions;

changes, delays or cancellations of government programs or requirements;

adoption of new laws or regulations that affect companies providing services;

curtailment of the governments’ outsourcing of services to private contractors; or

the level of political instability due to war, conflict, epidemics, pandemics or natural disasters.

    Contracts with federal, state and local governments and their agencies and departments are often subject to various uncertainties, rules, restrictions, regulations, oversight audits and profit and cost controls. If we violate a rule or regulation, fail to comply with a contractual or other restriction or do not satisfy an audit, a variety of penalties can be imposed on us including monetary damages, withholding or delay of payments to us and criminal and civil penalties. In “qui tam” actions brought by individuals or the government under the U.S. Federal False Claims Act or under similar state and local laws, treble damages can be awarded. Government contracts may also contain unlimited indemnification obligations. In addition, most of our government clients may modify, delay, curtail, renegotiate or terminate contracts at their convenience any time prior to their completion.

    Many government contracts are awarded through a rigorous competitive process. Governments and their agencies have increasingly relied upon multiple-year contracts with multiple contractors that generally require those contractors to engage in an additional competitive bidding process for each task order issued under a contract. This process may result in us facing significant additional pricing pressure and uncertainty and incurring additional costs. Moreover, we may not be awarded government contracts because of existing policies designed to protect small businesses and under-represented minorities. Any of the foregoing events could negatively affect our results of operations, cash flows and liquidity.

Amounts included in our backlog may not result in actual revenue or translate into profits. Our backlog is subject to cancellation and unexpected adjustments and therefore is an uncertain indicator of future operating results.
 
    Our backlog consists of the estimated amount of services to be completed from future work on uncompleted contracts or work that has been awarded with contracts still being negotiated. It also includes revenue from change orders and renewal options. Most of our contracts are cancelable on short or no advance notice. Reductions in backlog due to cancellation by a customer, or for other reasons, could significantly reduce the revenue that we actually receive from contracts in backlog. In the event of a project cancellation, we may be reimbursed for certain costs, but we typically have no contractual right to the total revenues reflected in our backlog.
 
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    Backlog amounts are determined based on target price estimates that incorporate historical trends, anticipated seasonal impacts, experience from similar projects and from communications with our customers. These estimates may prove inaccurate, which could cause estimated revenue to be realized in periods later than originally expected, or not at all. In the past, we have occasionally experienced postponements, cancellations and reductions in expected future work due to changes in our customers’ spending plans, as well as on construction projects, due to market volatility, regulatory and other factors. There can be no assurance as to our customers’ requirements or the accuracy of our estimates. As a result, our backlog as of any particular date is an uncertain indicator of future revenue and earnings. In addition, contracts included in our backlog may not be profitable. If our backlog fails to materialize, our business, financial condition, results of operations, profitability, cash flows and growth prospects could be materially and adversely affected.
 
Many of our customers are regulated by federal and state government agencies, and the addition of new regulations or changes to existing regulations may adversely impact demand for our services and the profitability of those services.
 
    Many of our energy customers are regulated by the Federal Energy Regulatory Commission, or FERC, and our utility customers are regulated by state public utility commissions. These agencies could change the way in which they interpret the application of current regulations and/or may impose additional regulations. Interpretative changes or new regulations having an adverse effect on our customers and the profitability of the services they provide could reduce demand for our services, which could adversely affect our results of operations, cash flows and liquidity.
     
    Any future restrictions or regulations that might be adopted could lead to operational delays, increased operating costs for our customers in the wind industry, reduced capital spending and/or delays or cancellations of future wind infrastructure projects, which could materially and adversely affect our business, financial condition, results of operations, profitability, cash flows and growth prospects.
 
We could incur substantial costs to comply with environmental, health, and safety laws and regulations and to address violations of or liabilities under these requirements.
 
    Our operations and products are subject to a variety of environmental laws and regulations in the jurisdictions in which we operate and sell products governing, among other things, air emissions, wastewater discharges, the use, handling and disposal of hazardous materials, soil and groundwater contamination, employee health and safety, and product content, performance and packaging. We cannot guarantee that we will at all times be in compliance with such laws and regulations and if we fail to comply with these laws and regulations or our permitting and other requirements, we may be required to pay fines or be subject to other sanctions. Also, certain environmental laws can impose the entire or a portion of the cost of investigating and cleaning up a contaminated site, regardless of fault, upon any one or more of a number of parties, including the current or previous owner or operator of the site. These environmental laws also impose liability on any person who arranges for the disposal or treatment of hazardous substances at a contaminated site. Third parties may also make claims against owners or operators of sites and users of disposal sites for personal injuries and property damage associated with releases of hazardous substances from those sites.
 
    Changes in existing environmental laws and regulations, or their application, could cause us to incur additional or unexpected costs to achieve or maintain compliance. The assertion of claims relating to on- or off-site contamination, the discovery of previously unknown environmental liabilities, or the imposition of unanticipated investigation or cleanup obligations, could result in potentially significant expenditures to address contamination or resolve claims or liabilities. Such costs and expenditures could have a material adverse effect on our business, financial condition, results of operations, profitability, cash flows and growth prospects.
 
We may not accurately estimate the costs associated with services provided under fixed price contracts, which could impair our financial performance.
 
    We derive a significant portion of our revenue from fixed-price contracts. Under these contracts, we typically set the price of our services on a per unit or aggregate basis and assume the risk that certain costs associated with our performance may be greater than what we estimated. In addition, we enter into contracts for specific projects or jobs that may require the installation or construction of an entire infrastructure system or specified units within an infrastructure system, which are priced on a per unit basis. Profitability will be reduced if actual costs to complete each unit exceed our original estimates. If estimated costs to complete the remaining work for the project exceed the expected revenue to be earned, the full amount of any expected loss on the project is recognized in the period the loss is determined. Our profitability is therefore dependent upon our ability to accurately estimate the costs associated with our services and our ability to execute in accordance with our plans. A variety of factors affect these costs, such as lower than anticipated productivity, conditions at work sites differing materially from those anticipated at the time we bid on the contract and higher costs of materials and labor. These variations, along with other risks
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inherent in performing fixed price contracts, may cause actual project revenue and profits to differ from original estimates. As a result, if actual costs exceed our estimates, we could have lower margins than anticipated, or losses, which could reduce our business, financial condition, results of operations, profitability, cash flows and growth prospects.
 
We recognize revenue from installation/construction fixed price contracts using the cost-to cost input method (formerly known as percentage-of-completion method) and variations of actual results from our assumptions may reduce our profitability.
 
    Revenues derived from fixed-price contracts that are recognized as performance obligations are satisfied over time (formerly known as the percentage-of-completion method), measured by the relationship of total cost incurred compared to total estimated contract costs (cost-to-cost input method). The cost-to-cost input method therefore relies on estimates of total expected contract costs. Contract revenue and total cost estimates are reviewed and revised on an ongoing basis as the work progresses. Adjustments arising from changes in the estimates of contracts revenue or costs are reflected in the fiscal period in which such estimates are revised. Estimates are based on management’s reasonable assumptions, judgment and experience, but are subject to the risks inherent in estimates, including unanticipated delays or technical complications. Variances in actual results from related estimates on a large project, or on several smaller projects, could be material. The full amount of an estimated loss on a contract is recognized in the period that our estimates indicate such a loss. Such adjustments and accrued losses could result in reduced profitability, which could negatively impact our liquidity and results of operations.
 
We derive a significant portion of our revenue from a concentrated base of customers, and the loss of a small number of our significant customers, or a reduction in their demand for our services, could impair our financial performance.
 
    Our business is concentrated among relatively few customers, and a significant proportion of our services are provided on a project-by-project basis. Although we have not been dependent upon any one customer, our revenue could significantly decline if we were to lose a small number of our significant customers, or if a few of our customers elected to perform the work that we provide with in-house service teams. In addition, our results of operations, cash flows and liquidity could be negatively affected if our customers reduce the amount of business they provide to us, or if we complete the required work on non-recurring projects and cannot replace them with similar projects. Many of the contracts with our largest customers may be canceled on short or no advance notice. Any of these factors could negatively impact our results of operations, cash flows and liquidity. See “Note 1. Business, Basis of Presentation and Significant Accounting Policies” and “Note 9. Commitments and Contingencies,” in the notes to audited consolidated financial statements.

In the ordinary course of our business, we may become subject to lawsuits, indemnity or other claims, which could materially and adversely affect our business, financial condition, results of operations, profitability, cash flows and growth prospects.
 
    From time to time, we are subject to various claims, lawsuits and other legal proceedings brought or threatened against us in the ordinary course of our business. These actions and proceedings may seek, among other things, compensation for alleged personal injury, workers’ compensation, employment discrimination and other employment-related damages, breach of contract, property damage, environmental liabilities, multiemployer pension plan withdrawal liabilities, punitive damages and civil penalties or other losses, liquidated damages, consequential damages, or injunctive or declaratory relief. We may also be subject to litigation involving allegations of violations of the Fair Labor Standards Act and state wage and hour laws. In addition, we generally indemnify our customers for claims related to the services we provide and actions we take under our contracts, and, in some instances, we may be allocated risk through our contract terms for actions by our customers or other third parties.
 
    Claimants may seek large damage awards and defending claims can involve significant costs. When appropriate, we establish reserves against these items that we believe to be adequate in light of current information, legal advice and professional indemnity insurance coverage, and we adjust such reserves from time to time according to developments. See “Note 9. Commitments and Contingencies” in the notes to the audited consolidated financial statements. We could experience a reduction in our profitability and liquidity if our legal reserves are inadequate, our insurance coverage proves to be inadequate or becomes unavailable, or our self-insurance liabilities are higher than expected. The outcome of litigation is difficult to assess or quantify, as plaintiffs may seek recovery of very large or indeterminate amounts in these types of lawsuits or proceedings, and the magnitude of the potential loss may remain unknown for substantial periods of time. Furthermore, because litigation is inherently uncertain, the ultimate resolution of any such claim, lawsuit or proceeding through settlement, mediation, or court judgment could have a material adverse effect on our business, financial condition or results of operations. In addition, claims, lawsuits and proceedings may harm our reputation or divert management’s attention from our business or divert resources away from operating our business, and cause us to incur significant expenses, any of which could have a material adverse effect on our business, financial condition, results of operations, profitability, cash flows and growth prospects.
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Certain of our businesses have employees who are represented by unions or are subject to collective bargaining agreements. The use of a unionized workforce and any related obligations could adversely affect our business, financial condition, results of operations, profitability, cash flows and growth prospects.
 
    Certain of our employees are represented by labor unions and collective bargaining agreements. Although all such collective bargaining agreements prohibit strikes and work stoppages, we cannot be certain that strikes or work stoppages will not occur despite the terms of these agreements. Strikes or work stoppages could adversely affect our relationships with our customers and cause us to lose business. Additionally, as current agreements expire, the labor unions may not be able to negotiate extensions or replacements on terms favorable to their members, or at all, or avoid strikes, lockouts or other labor actions from time to time that may affect their members. Therefore, it cannot be assured that new agreements will be reached with employee labor unions as existing contracts expire, or on desirable terms. Any action against us relating to the union workforce we employ could have a material adverse effect on our business, financial condition, results of operations, profitability, cash flows and growth prospects.

Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our financial condition and results of operations.
 
    We are subject to income taxes in the United States, and our domestic tax liabilities are subject to the allocation of expenses in differing jurisdictions. Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including:

changes in the valuation of our deferred tax assets and liabilities;

expected timing and amount of the release of any tax valuation allowances;

tax effects of stock-based compensation;

costs related to intercompany restructurings;
changes in tax laws, regulations or interpretations thereof; and

lower than anticipated future earnings in jurisdictions where we have lower statutory tax rates and higher than anticipated future earnings in jurisdictions where we have higher statutory tax rates.

    In addition, we may be subject to audits of our income, sales and other transaction taxes by U.S. federal and state authorities. Outcomes from these audits could have an adverse effect on our financial condition and results of operations.
 
We rely on information, communications and data systems in our operations.
 
    Systems and information technology interruptions and/or breaches in our data security could adversely affect our ability to operate and our operating results or could result in harm to our reputation. We are heavily reliant on computer, information and communications technology and related systems in order to operate. From time to time, we experience system interruptions and delays. Our operations could be interrupted or delayed, or our data security could be breached, if we are unable to add software and hardware, effectively maintain and upgrade our systems and network infrastructure and/or take other steps to improve the efficiency of and protect our systems. In addition, our computer and communications systems and operations could be damaged or interrupted by natural disasters, power loss, telecommunications failures, computer viruses, acts of war or terrorism, physical or electronic break-ins and similar events or disruptions, including breaches by computer hackers and cyber-terrorists. Any of these or other events could cause system interruptions, delays and/or loss of critical data including private data, could delay or prevent operations, including the processing of transactions and reporting of financial results, processing inefficiency, downtime, or could result in the unintentional disclosure of customer or our information, which could adversely affect our operating results, harm our reputation and result in significant costs, fines or litigation. Similar risks could affect our customers and vendors, indirectly affecting us. While management has taken steps to address these concerns by implementing network security and internal control measures, there can be no assurance that a system failure or loss or data security breach will not materially adversely affect our financial condition and operating results.

Risks Related to Our Capital Structure
  
We have a significant amount of debt. Our substantial indebtedness could adversely affect our business, financial condition and results of operations and our ability to meet our payment obligations.
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    We have a significant amount of debt and substantial debt service requirements. This level of debt could have significant consequences on our future operations, including:

making it more difficult for us to meet our payment and other obligations;

our failure to comply with the financial and other restrictive covenants contained in our debt agreements, which could trigger events of default that could result in all of our debt becoming immediately due and payable;

reducing the availability of our cash flows to fund working capital, capital expenditures, acquisitions or strategic investments and other general corporate requirements, and limiting our ability to obtain additional financing for these purposes;

subjecting us to increased interest expense related to our indebtedness with variable interest rates, including borrowings under our credit facility;

limiting our flexibility in planning for, or reacting to, and increasing our vulnerability to changes in our business, the industry in which we operate and the general economy;

placing us at a competitive disadvantage compared to our competitors that have less debt or are less leveraged;

making cash dividends more expensive under our Series B Preferred Stock; and

preventing us from paying dividends.

    Any of the above-listed factors could have an adverse effect on our business, financial condition and results of operations and our ability to meet our payment obligations. Our ability to meet our payment and other obligations under our debt instruments depends on our ability to generate significant cash flow in the future. This, to some extent, is subject to general economic, financial, competitive, legislative and regulatory factors as well as other factors that are beyond our control. We cannot assure you that our business will generate cash flow from operations, or that future borrowings will be available to us under our Third A&R Credit Agreement in an amount sufficient to enable us to meet our payment obligations and to fund other liquidity needs. If we are not able to generate sufficient cash flow to service our debt obligations, we may need to refinance or restructure our debt, sell assets, reduce or delay capital investments, or seek to raise additional capital, and some of these activities may be on terms that are unfavorable or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. If we are unable to implement one or more of these alternatives, we may not be able to meet our payment obligations.
 
Our Third A&R Credit Agreement, the Series A Preferred Stock and Series B Preferred Stock impose restrictions on us that may prevent us from engaging in transactions that might benefit us.
 
    The Third A&R Credit Agreement contains restrictions that, among other things prevents or restricts us from:

engaging in certain transactions with affiliates;

buying back shares or paying dividends in excess of specified amounts;

making investments and acquisitions in excess of specified amounts;

incurring additional indebtedness in excess of specified amounts;

creating certain liens against our assets;

prepaying subordinated indebtedness;

engaging in certain mergers or combinations;

failing to satisfy certain financial tests; and

engaging in transactions that would result in a “change of control.”
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    Additionally, the holders of our Series A Preferred Stock and Series B Preferred Stock have the right to consent to certain actions prior to us undertaking them, including, but not limited to:

creating or authorizing any senior stock, parity stock and stock that votes together with the Series A Preferred Stock or Series B Preferred Stock, or capital stock of a subsidiary;

reclassifications, alterations or amendments of any of our capital stock or of our subsidiaries that would render such capital stock senior or on parity to the Series A Preferred Stock or Series B Preferred Stock;

entering into any agreement with respect to, or consummating, any merger, consolidation or similar transaction with any other person pursuant to which we or a subsidiary of ours would not be the surviving entity, if as a result of such transaction, any capital stock or equity or equity-linked securities of such person would rank senior to or pari passu with the Series A Preferred Stock or Series B Preferred Stock;

entering certain agreements with respect to, or consummating, any merger, consolidation or similar transaction with any other person pursuant to which we or a subsidiary of ours would not be the surviving entity, if as a result of such transaction, any capital stock or equity or equity-linked securities of such person would rank senior to or on parity with such Series A Preferred Stock or Series B Preferred Stock; 

assuming, incurring or guarantying, or authorizing the creation, assumption, incurrence or guarantee of, any indebtedness for borrowed money (subject to certain exceptions);

authorizing or consummating certain change of control events or liquidation events; or

altering, amending, supplementing, restating, waiving or otherwise modifying the certificates governing the Series A Preferred Stock or Series B Preferred Stock or any other of our documents in a manner that would reasonably be expected to be materially adverse to the rights or obligations of the holders of Series A Preferred Stock or Series B Preferred Stock.

    The Series B Preferred Stock contains additional consent rights, including with respect to:

increasing the size of the Board;

conducting any business or entering into or conducting any transaction or series of transaction with, or for the benefit of, any affiliate, subject to limitations;

entering into any transaction, contract, agreement or series of related transactions, contracts, or agreement with respect to the provision of services to customers exceeding certain amounts; or

with respect to Saiia, subject to certain limitations: (i) entering into any agreement with respect to, or consummate any, merger, consolidation or similar transaction with Saiia or any of its subsidiaries, (ii) assuming, incurring or guaranteeing, or authorizing the creation, assumption, incurrence or guarantee of any indebtedness by, or for the benefit of Saiia or any of its subsidiaries, (iii) creating, incurring, assuming or suffering to exist any lien upon or with respect to any property or assets for the benefit of Saiia or any of its subsidiaries or security any obligations of Saiia or any of its subsidiaries above certain limits, (iv) consummating any sale, lease, transfer, issuance or other disposition, including by means of a merger, consolidation or similar transaction, of any shares of capital stock of a subsidiary or any other of our assets or of or any subsidiary to Saiia or any of its subsidiaries, or (v) subject to certain exceptions, making any advance, loan, extension of credit or capital contribution to, or purchase any capital stock, bonds, notes, debentures or other debt securities of Saiia or any of its subsidiaries.

    Accordingly, provisions in the Third A&R Credit Agreement that restrict our business could make compliance with the terms and conditions of the Third A&R Credit Agreement more difficult. Furthermore, provisions in the Third A&R Credit Agreement, as well as rights of holders of the Series A Preferred Stock and Series B Preferred Stock could impact our ability to engage in transactions we deem beneficial.
 
There may be future sales of our Common Stock or other dilution of our equity that could adversely affect the market price of our Common Stock. In connection with certain completed acquisitions, we have issued shares of our Common Stock, and
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we additionally have the option to issue shares of our Common Stock instead of cash as consideration for future earn-out obligations.
 
    We may agree to issue additional shares in connection with other future acquisition or financing transactions, which, if issued, would dilute your share ownership and could lead to volatility in our Common Stock price. We grow our business organically as well as through acquisition. One method of acquiring companies or otherwise funding our corporate activities is through the issuance of equity securities. In connection with certain acquisitions, we have the option to issue shares of our Common Stock instead of paying cash for the related earn-out obligations. Such issuances could have the effect of diluting our earnings per share as well as our existing stockholders’ individual ownership percentages and could lead to volatility in our Common Stock price.
 
    We are not restricted from issuing additional Common Stock. The issuance of additional shares of our Common Stock in connection with future acquisitions, convertible securities or other issuances of our Common Stock, including restricted stock awards, restricted stock units and/or options, or otherwise, will dilute the ownership interest of our holders of our Common Stock. Sales of a substantial number of shares of our Common Stock or other equity-related securities in the public market could depress the market price of our Common Stock and impair our ability to raise capital through the sale of additional equity or equity-linked securities. We cannot predict the effect that future sales of our Common Stock or other equity-related securities would have on the market price of our Common Stock.
 
Mohsin Meghji has significant ability to influence corporate decisions.

Mr. Meghji directly and indirectly through M III Sponsor I LLC (“M III Sponsor”) and other entities, beneficially owns 979,308 shares of Common Stock (representing approximately 4.3% of the issued and outstanding Common Stock as of March 8, 2021) and warrants exercisable for an additional 1,434,496 shares of Common Stock.

Pursuant to the terms of the Third Amended and Restated Investor Rights Agreement, dated as of January 23, 2020 (the "Third A&R Investor Rights Agreement"), M III Sponsor has consent rights over certain matters for so long as M III Sponsor and certain of their permitted transferees and affiliates, directly or indirectly, beneficially own at least fifty percent (50%) of the Common Stock beneficially owned by them as of the closing of our business combination, including entering into, waiving, amending or otherwise modifying the terms of certain transactions or agreements, and except as contemplated by the Third A&R Investor Rights Agreement, increasing or decreasing the size of our Board. Under the Third A&R Investor Rights Agreement, M III Sponsor also has ongoing rights to nominate one director, depending on the ownership interests of M III Sponsor.

Our Certificate of Incorporation also provides that M III Sponsor and its respective partners, principals, directors, officers, members, managers and/or employees, including any of the foregoing who serve as officers or directors of the post-combination company, do not have any fiduciary duty to refrain from engaging directly or indirectly in the same or similar business activities or lines of business as the post-combination company or any of its subsidiaries.

Accordingly, Mr. Meghji has the ability to influence corporate decisions, whether through a representative on our Board, voting shares of Common Stock (including those obtained upon exercise of warrants), or rights granted under agreements entered into with Mr. Meghji and M III Sponsor.

The interests of Mr. Meghji and M III Sponsor may not align with the interests of our other stockholders. M III Sponsor is in the business of making investments in companies and may acquire and hold interests in businesses that compete directly or indirectly with us. M III Sponsor may also pursue acquisition opportunities that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us.

Ares and the Ares Parties may have the ability to influence certain corporate decisions through their ownership of Common Stock obtainable upon conversion of the Series A Preferred Stock, and the exercise of rights, including under the respective certificates of designation for the Series A Preferred Stock and Series B Preferred Stock.

Ares Special Situations Fund IV, L.P. (“ASSF IV”) and ASOF Holdings I, L.P. (“ASOF Holdings, and together with ASSF IV, the “Ares Parties”), each a fund affiliated with Ares Management LLC (“Ares”), on behalf of its affiliated funds, investment vehicles and/or managed accounts collectively own:

17,482.50 shares of our Series A Preferred Stock (constituting all of the issued and outstanding Series A Preferred Stock);
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50,000 shares Series B-1 Preferred Stock (constituting all of the issued and outstanding Series B-1 Preferred Stock);
50,000 shares of Series B-2 Preferred Stock (constituting all of the issued and outstanding Series B-2 Preferred Stock);
99,123.87 shares of Series B-3 Preferred Stock (constituting 99.6% of the 99,473.87 issued and outstanding Series B-3 Preferred Stock); and
Warrants to purchase 5,996,310 shares of Common Stock.

Ares has the right to appoint two directors to our Board pursuant to the terms of the certificate of designations for the Series B-1 Preferred Stock and Series B-2 Preferred Stock, but has agreed to only nominate one member so long as the terms of a waiver agreement are satisfied. On March 4, 2020, Ares designated a director to our Board. Ares has consent rights under the certificate of designations for the Series A Preferred Stock and Series B Preferred Stock. The Series A Preferred Stock and Series B Preferred Stock impose restrictions on us that may prevent us from engaging in transactions that might benefit us.

Accordingly, Ares and the Ares Parties have the ability to influence corporate decisions, whether through a representative on our Board, voting shares of Common Stock obtained upon conversion of the Series A Preferred Stock or exercise of warrants, or rights granted under the certificate of designations of the Series A Preferred Stock and Series B Preferred Stock, and other agreements entered into with such parties.

The interests of Ares, ASSF IV and ASOF Holdings may not align with the interests of our other stockholders. Ares, ASSF IV and ASOF Holdings are in the business of making investments in companies and may acquire and hold interests in businesses that compete directly or indirectly with us. Ares, ASSF IV and ASOF Holdings may also pursue acquisition opportunities that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us.

 Our liquidity remains seasonally constrained and we could require additional sources of liquidity in the future to fund our operations and service our indebtedness.
 
    We have experienced decreased liquidity due to the increase of our required seasonal payments and interest under our Third A&R Credit Agreement, acquisition integration costs and delayed collections for costs relating to the multiple severe weather events in the third quarter 2018 and were completed in the second quarter of 2019. Although we have taken steps to enhance our liquidity, our liquidity remains seasonally constrained.
 
    We believe the cash generated from operations, along with our unused credit capacity of $67.2 million and available cash balances as of December 31, 2020, will be sufficient to fund any working capital needs for the next 12 months, but we cannot provide any assurance that these sources will be sufficient because there are many factors that could affect our liquidity, including some that are beyond our control. Factors that could cause our future liquidity to vary materially from expectations include, but are not limited to, weather events, bonding obligations, contract disputes with customers, loss of customers, spending patterns of customers, unforeseen costs and expenses and our ability to maintain compliance with the covenants and restrictions in our Third A&R Credit Agreement (or obtain waivers in the event of noncompliance). If we encounter circumstances that place unforeseen constraints on our capital resources, we will be required to take additional measures to conserve or enhance liquidity.

    In the future, we may require additional funds for operating purposes and may seek to raise additional funds through debt or equity financing. If we ever need to seek additional financing, there is no assurance that this additional financing will be available, or if available, will be on reasonable terms. If our liquidity and capital resources are insufficient to meet our working capital requirements or fund our debt service obligations, we could face substantial liquidity problems, may not be able to generate sufficient cash to service all our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful. In the event we are not able to fund our working capital, we will not be able to implement or may be required to delay all or part of our business plan, and our ability to improve our operations, generate positive cash flows from operating activities and expand the business would be materially adversely affected.
 
    If our results of operations were negatively impacted by unforeseen factors, or impacted to a greater degree than anticipated, we might not be able to maintain compliance with the covenants and restrictions in our Third A&R Credit Agreement. If we are unable to comply with the financial covenants in the future, and are unable to obtain a waiver or forbearance, it would result in an uncured default under the Third A&R Credit Agreement. If a default under the Third A&R Credit Agreement were not cured or waived, we would be unable to borrow under the Third A&R Credit Agreement and the indebtedness thereunder could be declared immediately due and payable. A default under our Third A&R Credit Agreement may also be considered a default under certain other of our instruments and contracts. If we were unable to borrow under the
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Third A&R Credit Agreement, we would need to meet our capital requirements using other sources. Alternative sources of liquidity may not be available on acceptable terms if at all. Even if we were able to obtain an amendment, forbearance agreement or waiver in the future, we might be required to agree to other changes to the Third A&R Credit Agreement, including increased interest rates or premiums, more restrictive covenants and/or pay a fee for such amendment, forbearance agreement or waiver. Any of these events would have a material adverse effect on our business, financial condition and liquidity.

Our quarterly operating results may fluctuate significantly and could fall below the expectations of securities analysts and investors due to seasonality and other factors, some of which are beyond our control, resulting in a decline in our stock price.
 
    Our quarterly operating results may fluctuate significantly because of several factors, including:

weather events;

labor availability and costs for hourly and management personnel;

profitability of our products and services, especially in new markets and due to seasonal fluctuations;

changes in interest rates;

impairment of long-lived assets;

macroeconomic conditions, both nationally and locally;

negative publicity relating to products and services we offer;

changes in consumer preferences and competitive conditions;

expansion to new markets; and

fluctuations in commodity prices.

Our Certificate of Incorporation, Bylaws and certain provision of Delaware law contain anti-takeover provisions that could impair a takeover attempt.
 
    As a Delaware corporation, anti-takeover provisions may impose an impediment to the ability of others to acquire control of us, even if a change of control would be of benefit to our stockholders. In addition, certain provisions of our Certificate of Incorporation and our Bylaws, also may impose an impediment or discourage others from a takeover.
 
    These provisions include:

a staggered board of directors providing for three classes of directors, which limits the ability of a stockholder or group to gain control of our board of directors;

a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;

a prohibition on stockholders calling a special meeting and the requirement that a special meeting of stockholders may only be called by (i) the chairman of our Board, (ii) our Chief Executive Officer, (iii) a majority of our Board, or (iv) directors designated by M III Sponsor subject to certain conditions set forth in the Third A&R Investor Rights Agreement; and

the requirement that changes or amendments to certain provisions of our Certificate of Incorporation or Bylaws must be approved by holders of at least two-thirds of the Common Stock and, in some cases under our Bylaws, 80% of the Common Stock.


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The terms of our Series A Preferred Stock and Series B Preferred Stock reduce the likelihood of dividend payments on our Common Stock, and may otherwise adversely affect the Common Stock.
 
    If not paid in cash at a rate of 10% per annum, dividends on our Series A Preferred Stock will accrue and increase the stated value of the Series A Preferred Stock at a rate of 12% per annum. If not paid in cash at a rate of 13.5% per annum (or 12% in the event our Total Net Leverage Ratio is less than or equal to 1.50 to 1.00), dividends on our Series B Preferred Stock will accrue and increase the stated value of the Series B Preferred Stock at a rate of 15% per annum.
 
    If we elect not to pay cash dividends, or our business does not generate enough cash to make the cash dividends on the Series A Preferred Stock and Series B Preferred Stock, dividends will accrue and increase the stated value. An increase in the stated value would result in an increase in the aggregate amount of cash we need to pay future cash dividends. Dividends on the Series A Preferred Stock and Series B Preferred Stock rank senior in priority to dividends on our Common Stock. Accordingly, the terms of the Series A Preferred Stock and Series B Preferred Stock reduce the likelihood that we will pay dividends on our Common Stock in the future, which may cause the price of our Common Stock to decline. An increase in the stated value may also result in holders of Series A Preferred Stock and Series B Preferred Stock having larger claims in the event of our liquidation or dissolution.
 
Our Common Stockholders may face substantial dilution as a result of warrants.
 
    On May 20, 2019, under the First Equity Commitment Agreement, we issued the First ECA Warrants exercisable into an aggregate of 2,545,934 shares of Common Stock. On August 30, 2019, under the Second Equity Commitment Agreement, we issued the Second ECA Warrants exercisable into an aggregate of 900,000 shares of Common Stock. On November 14, 2019, we issued the Third ECA Warrants exercisable into 3,568,750 shares of Common Stock. On November 14, 2019, we also issued the Preferred Exchange Agreement Warrants exercisable into 657,383 shares of Common Stock pursuant to the Preferred Exchange Agreement.
 
    Each of the First Equity Commitment Agreement, Second Equity Commitment Agreement, Third Equity Commitment Agreement and Preferred Exchange Agreement has provisions that require us to issue additional warrants upon additional issuances of Common Stock and warrants. These additional issuances may result in a significant additional number of warrants and Common Stock, the exact number of which cannot be determined and which may are depend on future events, many of which are out of our control
 
    The warrants issued under the First Equity Commitment Agreement, Second Equity Commitment Agreement, Third Equity Commitment Agreement and Preferred Exchange Agreement are exercisable into our Common Stock at an exercise price per share of $0.0001, which the holder may pay by check or wire transfer, or by instructing us to withhold a number of shares of Common Stock then issuable upon exercise of the Warrant with an aggregate fair market value as of the date of exercise equal to the aggregate exercise price, or any combination of the foregoing. The number of shares of Common Stock issuable upon exercise of the warrants adjust for dividends, subdivisions or combinations; cash distributions or other distributions; reorganization, reclassification, consolidation or merger; and spin-offs.
 
    The shares of Common Stock that may be issued under the warrants pursuant to the First Equity Commitment Agreement, Second Equity Commitment Agreement, Third Equity Commitment Agreement and Preferred Exchange Agreement are subject to that certain Amended and Restated Registration Rights Agreement, dated March 26, 2018, as amended (the “Registration Rights Agreement”), and accordingly, we may be required to register the shares of Common Stock underlying the warrants for resale.
 
    Accordingly, our presently existing warrants and warrants that may be issued in the future may result in substantial additional issuances and resales of Common Stock. In certain instances, the timing and number of additional warrants that may be issued is unknown and dependent upon future events and circumstances, some of which are outside of our control. Additional issuances of Common Stock, and/or sales of Common Stock, would have the effect of diluting our earnings per share as well as our existing shareholders’ individual ownership percentages and could lead to volatility in our Common Stock price. Sales of a substantial number of shares of our Common Stock could depress the market price of our Common Stock and impair our ability to raise capital through the sale of additional equity or equity-linked securities.
 
The Series A Preferred Stock may result in substantial dilution to holders of our Common Stock.
 
    On November 14, 2019, we issued 19,123.87 shares of Series B-3 Preferred Stock and 657,383 Preferred Exchange Agreement Warrants to IEA LLC in exchange for 50% of the outstanding Series A Preferred Stock pursuant to the Preferred Exchange Agreement. As of the date hereof, we have 17,482.5 shares of Series A Preferred Stock outstanding. Any holder of
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Series A Preferred Stock may elect, by written notice to us (w) at any time and from time to time on or after the third anniversary of March 26, 2018, (x) at any time and from time to time if the terms of the Series B Preferred Stock or Third A&R Credit Agreement (or other facility) would prohibit the payment of cash dividends on the Series A Preferred Stock, (y) at any time any shares of Series B Preferred Stock are outstanding, or (z) at any time and from time to time on or after the non-payment of dividends when due, failure to redeem shares of Series A Preferred Stock when required or any other material default (in each case, as further specified in the certificate) until such non-payment, failure or default is cured by us, to cause us to convert, without the payment of additional consideration by such holder, all or any portion of the issued and outstanding shares of Series A Preferred Stock held by such holder, as specified by such holder in such notice, into a number of shares of Common Stock determined by dividing (i) the stated value plus accrued and unpaid dividends by (ii) the VWAP per share of Common Stock for the 30 consecutive trading days ending on the trading day immediately preceding the conversion date. In the event the Series A Preferred Stock is converted following an uncured non-payment, failure or default event, or if a holder of Series A Preferred Stock is converting pursuant to (x) or (y) above, for the purposes of the foregoing calculation, VWAP per share shall be multiplied by 90%. The “VWAP per share” is defined as the per share volume-weighted average price as reported by Bloomberg (as further described in the certificate governing the Series A Preferred Stock).
 
    The shares of Common Stock that may be issued upon conversion of the Series A Preferred Stock are subject to the Registration Rights Agreement, and accordingly, we may be required to register the shares of Common Stock underlying the Series A Preferred Stock for resale.

    Accordingly, the Series A Preferred Stock may result in substantial additional issuances and resales of Common Stock. The timing and number of shares of Common Stock that may be issued as a result of the Series A Preferred Stock is unknown and dependent upon future events and circumstances, some of which are outside of our control. Additional issuances of Common Stock, and/or sales of Common Stock, would have the effect of diluting our earnings per share as well as our existing shareholders’ individual ownership percentages and could lead to volatility in our Common Stock price. Sales of a substantial number of shares of our Common Stock could depress the market price of our Common Stock and impair our ability to raise capital through the sale of additional equity or equity-linked securities.
 
Our stock price has experienced significant volatility.
 
    Our stock price has exhibited substantial volatility in 2020. Our price may fluctuate in response to a number of events and factors, including, but not limited to:

actual or anticipated quarterly operating results;

new developments and significant transactions;

the financial projections we provide to the public, and any changes to the projections or failure to meet the projections;

changes in our credit ratings;

the public’s reaction to our press releases, other public announcements and filings with the SEC;

changes in financial estimates, recommendations and coverages by securities analysts;

media coverage of our business and financial performance;

trends in our industry;

significant changes in our management;

lawsuits threatened or filed against us; and

general economic conditions.

    Price volatility over a given period or a low stock price may result in a number of negative outcomes, including, but not limited to:

creating potential limitations on the ability to raise capital through the issuance of equity or equity linked securities;

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impacting the value of our equity compensation, which affects our ability to recruit and retain employees;

decreasing the value of the contingent earn-out related to our merger agreement, held in large part by members of management, which could cause a decline in job satisfaction or lead to management turnover;

difficulty complying with the listing standards of NASDAQ; and

increasing the risk of regulatory proceedings and litigation, including class action securities litigation

    If any of these outcomes were to occur, it could materially and adversely affect our business, financial condition, or results of operations, and the value of your investment.
 
Risks Related to Our Industry and Our Customers’ Industries
 
Economic downturns could reduce capital expenditures in the industries we serve, which could result in decreased demand for our services.
 
    The demand for our services has been, and will likely continue to be, cyclical in nature and vulnerable to general downturns in the U.S. economy. During economic downturns, our customers may not have the ability to fund capital expenditures for infrastructure, or may have difficulty obtaining financing for planned projects. In addition, uncertain or adverse economic conditions that create volatility in the credit and equity markets may reduce the availability of debt or equity financing for our customers, causing them to reduce capital spending. This has resulted, and in the future could result, in cancellations of projects or deferral of projects to a later date. Such cancellations or deferrals could materially and adversely affect our results of operations, cash flows and liquidity. These conditions could also make it difficult to estimate our customers’ demand for our services and add uncertainty to the determination of our backlog.
 
    In addition, our customers are negatively affected by economic downturns that decrease the need for their services or the profitability of their services. During an economic downturn, our customers also may not have the ability or desire to continue to fund capital expenditures for infrastructure or may outsource less work. A decrease in related project work could negatively impact demand for the services we provide and could materially adversely affect our business, financial condition, results of operations, profitability, cash flows and growth prospects.
  
Our industry is highly competitive, which may reduce our market share and harm our financial performance.
 
    We compete with other companies in most of the markets in which we operate, ranging from small independent firms servicing local markets to larger firms servicing regional and national markets. We also face competition from existing and prospective customers that employ in-house personnel to perform some of the services we provide. Additionally, organizations that have adequate financial resources and access to technical expertise and skilled personnel may become a competitor. Most of our customers’ work is awarded through a bid process. Consequently, although management believes reliability is often more important to customers than price, price is often the principal factor that determines which service provider is selected, especially on smaller, less complex projects. Smaller competitors sometimes win bids for these projects based on price alone due to their lower costs and financial return requirements. Additionally, our bids for certain projects may not be successful because of a customer’s perception of our relative ability to perform the work as compared to our competitors or a customer’s perception of technological advantages held by our competitors as well as other factors. Our business, financial condition, results of operations, profitability, cash flows and growth prospects could be materially and adversely affected if we are unsuccessful in bidding for projects or renewing our contracts, or if our ability to win such projects or agreements requires that we accept lower margins.

ITEM 1B. UNRESOLVED STAFF COMMENTS

    Not Applicable.

ITEM 2. PROPERTIES

    Our corporate headquarters, located in Indianapolis, Indiana, is a leased facility approximating 27,000 square feet. We also lease a 56,000 square foot office and 26,000 square foot maintenance facility in Clinton, Indiana. As of December 31, 2020, our operations were conducted from approximately 15 locations within the U.S. None of these facilities is material to our operations because most of our services are performed on customers’ premises or on public rights of way and suitable alternative locations are available in substantially all areas where we currently conduct business.
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We also own property and equipment that had a net book value of approximately $130.7 million as of December 31, 2020. This property and equipment includes trucks, tractors, trailers, forklifts, backhoes, sidebooms, bulldozers, excavators, trenchers, graders, loaders, scrapers, drilling machines, cranes, computers, computer software, office and building equipment, including furniture and fixtures and other equipment. Substantially all of our equipment is acquired from third-party vendors, upon none of which we depend, and we did not experience any difficulties in obtaining desired equipment in 2020.

ITEM 3. LEGAL PROCEEDINGS

For information regarding legal proceedings, see Note 9. Commitments and Contingencies of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K, which is incorporated herein by reference.

ITEM 4. MINE SAFETY DISCLOSURES

    Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information and Holders

    Our Common Stock is listed on the NASDAQ stock market under the symbol IEA. As of February 9, 2021 there were 2,855 holders of record of our Common Stock. Our warrants are listed on the NASDAQ Capital Market under the symbol IEAW. As of February 9, 2021, there were 2,626 holders of record of our warrants.

Dividend Policy
    
    Our current credit facility and the certificate of designation for our Series B Preferred Stock includes certain limitations on the payment of cash dividends on our Common Stock. We have not paid any cash dividends since our initial public offering and do not anticipate paying any cash dividends on our Common Stock in the foreseeable future.

Stock Performance

    The performance graph below compares the cumulative total return for our Common Stock with the cumulative total return (including reinvestment of dividends) of the Russell Broadbased Index Total Return (“Russell 3000”), and our peer group, which is composed of MasTec, Inc., Quanta Services, Inc., MYR Group, Inc., Construction Partners, Inc., Emcor Corporation, Granite Construction, Inc., Tetra Tech, Inc., Willdan Group, Inc., Dycom Industries, Inc. and Primoris Services Corporation. The graph assumes that the value of the investment in our Common Stock, as well as that of the Russell 3000 and our peer group, was $100 on March 31, 2018 and tracks it quarterly through December 31, 2020. The comparisons in the graph are based upon historical data and are not intended to forecast or be indicative of possible future performance of our Common Stock.

    The performance graph shall not be deemed incorporated by reference by any general statement incorporating by reference this Annual Report into any filing under the Securities Act or Exchange Act, except to the extent we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such acts.

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https://cdn.kscope.io/f53f0cb9b247905c6d3a588a61180682-iea-20201231_g1.jpg
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ITEM 6. SELECTED FINANCIAL DATA

    The information below is only a summary and should be read in conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited consolidated financial statements and the accompanying notes included in “Item 8. Financial Statements and Supplementary Data” in this Annual Report.
For the Years Ended December 31,
(in thousands, except per share data)20202019201820172016
Statement of Operations Data:
Revenue(1)
$1,752,905 $1,459,763 $779,343 $454,949 $602,665 
Cost of revenue1,564,213 1,302,746 747,817 388,928 517,419 
Gross profit$188,692 $157,017 $31,526 $66,021 $85,246 
Selling, general and administrative expenses$113,266 $120,186 $72,262 $33,543 $30,705 
Income (loss) from operations75,426 36,831 (40,736)32,478 54,541 
Other (expense) income, net:(62,118)(27,959)32,038 (2,090)(303)
Net income (loss) from continuing operations$728 $6,231 $4,244 $16,525 $64,451 
Net income (loss) from discontinued operations— — — — 1,087 
Net income (loss)$728 $6,231 $4,244 $16,525 $65,538 
Less: Convertible Preferred Stock dividends(2,628)(2,875)(1,597)— — 
Less: Contingent consideration fair value adjustment— (23,082)(46,291)— — 
Net income (loss) available for common stockholders$(1,900)$(19,726)$(43,644)$16,525 $65,538 
Earnings Per Share Data:(2)
Net (loss) income from continuing operations per common share - basic$(0.09)$(0.97)$(2.01)$0.77 $2.99 
Net income (loss) from discontinued operations per common share - basic— — — — 0.05 
Net (loss) income per common share - basic$(0.09)$(0.97)$(2.01)$0.77 $3.04 
Cash Flow Data:
Net cash provided by (used in) operating activities$57,746 $79,812 $47,018 $(9,109)$53,591 
Net cash (used in) provided by investing activities(3,113)610 (169,834)(3,508)(3,000)
Net cash provided by (used in) financing activities(37,850)(4,474)189,250 (4,113)(29,617)
As of December 31,
20202019201820172016
Balance Sheet Data:
Cash and cash equivalents$164,041 $147,259 $71,311 $4,877 $21,607 
Total assets729,140 824,921 639,228 126,703 147,716 
Long-term debt159,225 162,901 295,727 33,674 — 
Debt Series B Preferred Stock173,868 166,141 — — — 
Total liabilities801,818 916,541 735,441 136,722 134,841 
Preferred stock17,483 17,483 34,965 — — 
Total stockholders' (deficit) equity(90,161)(109,103)(131,178)(10,019)12,875 

(1) The Company completed two acquisitions in late 2018. For the years ended December 31, 2019 and 2018, the acquired businesses revenue was $582.3 million and $125.6 million respectively.

(2) The calculation of weighted average common shares outstanding during the periods preceding a reverse recapitalization generally requires the Company to use the capital structure of the entity deemed to be the acquirer for accounting purposes to calculate earnings per share. However, as a limited liability company, IEA Services had no outstanding common shares prior to the Merger. Therefore, the weighted average common shares outstanding for all comparable prior periods preceding the Merger is based on the capital structure of the acquired company, as management believes that is the most useful measure. See Note 10. Earnings (Loss) Per Share in the notes to the audited consolidated financial statements included in Item 8.
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

    The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and the notes to those financial statements included as Item 8 in this Annual Report. This discussion and analysis includes forward-looking statements that are based on current expectations and are subject to uncertainties and unknown or changed circumstances. For further discussion, please see “Forward-Looking Statements” at the beginning of this Annual Report. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those risks inherent with our business as discussed in “Item 1A. Risk Factors.”

    Throughout this section, unless otherwise noted, “IEA,” the “Company,” “we,” “us” and “our” refer to Infrastructure and Energy Alternatives, Inc. and its consolidated subsidiaries. Certain amounts in this section may not foot due to rounding.

Overview

    We are a leading diversified infrastructure construction company with specialized energy and heavy civil expertise throughout the United States. We specialize in providing complete engineering, procurement and construction services throughout the United States for the renewable energy, traditional power and civil infrastructure industries. These services include the design, site development, construction, installation and restoration of infrastructure. We have completed more than 240 wind and solar projects in 40 states and construct one of every five gigawatts put in to place throughout the U.S. in any given year. Although the Company has historically focused on the renewable industry, but has recently focused on further expansion into the solar market and with our recent acquisitions have expanded its construction capabilities and geographic footprint in the areas of environmental remediation, industrial maintenance, specialty paving, heavy civil and rail infrastructure construction, creating a diverse national platform of specialty construction capabilities. We believe we have the ability to continue to expand these services because we are well-positioned to leverage our expertise and relationships in the wind energy business to provide complete infrastructure solutions in all areas.

    We have two reportable segments: the Renewables (“Renewables”) segment and the Heavy Civil and Industrial (“Specialty Civil”) segment. See Segment Results for a description of the reportable segments and their operations.

Coronavirus Pandemic Update

    The COVID-19 pandemic continues to significantly impact the United States and the world. Since the start of the COVID-19 pandemic, we have been focused on the safety of our employees and ensuring that our construction sites are managed by taking all reasonable precautions to protect on-site personnel.

    We took the following actions in the first half of 2020 to address the risks attributable to the COVID-19 pandemic:

We established a dedicated COVID-19 task force representing all parts of the Company to review and implement actions to prepare for the impacts on our operations, including a variety of protocols in the areas of social distancing, working from home, emergency office and project site closures, and travel restrictions.

In addition to our existing site crisis management plans, our operations expanded and implemented their pandemic response plans to ensure a consistent, comprehensive response to various COVID-19 scenarios.

We implemented more stringent office and project site cleaning and hygiene protocols in all locations. We also developed more stringent tool, vehicle and equipment cleaning protocols.

For employees, we established a regularly updated COVID-19 information hub with FAQs, important communications, regularly updated protocols, business planning tools, best practices, signage/flyers and other important resources.

We significantly increased communications, signage and oversight of personal hygiene requirements to drive better prevention practices.

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We postponed social gatherings, large in-person training sessions and other activities involving groups of 10 or more.

We prohibited virtually all Company air travel unless approved by executive leadership. We also required all employees to report their personal travel schedules in order to closely monitor and take any necessary steps to maintain the safety of our workforce.

We increased our efforts to reduce selling, general and administrative expenses by implementing a hiring freeze, delaying the Company 401(k) match until later in the year, prohibiting all non-essential travel, reducing new initiatives, deferring promotions and salary changes, and canceling any non-essential capital expenditures or consulting work.

To mitigate the effects of working from home and travel bans, we significantly increased the use of remote communication technologies.

    We are actively monitoring the COVID-19 pandemic, including disease progression, federal, state and local government actions, the Center for Disease Control (“CDC”) and World Health Organization (“WHO”) responses, supplier and supply chain risks, and prevention and containment measures to maintain business operations. As the COVID-19 pandemic and the responses by federal, state and local governments continue to evolve, we continue to make adjustments to our practices and policies to protect the health of our employees and those we work with at our projects and office locations, while continuing to provide our essential construction services to our clients.

    We believe that the foregoing actions have significantly reduced the Company’s exposure to the effects of COVID-19, including our workforce’s exposure to infection from COVID-19. As of today, we have had a low incidence of infection in our workforce.

    The impact of COVID-19 on construction businesses such as ours is evolving rapidly and its future effects are uncertain.  The Company has received several notices of force majeure from project owners as a result of delivery delays due to COVID-19. We have experienced project interruptions and restrictions that have delayed project timelines from those originally planned, and we have experienced some temporary work stoppages. This has led to general inefficiencies from having to start and stop work, re-sequencing work, requiring on-site health screenings before entering a job site, and following proper social distancing practices. The Company incurred $3.0 million of specific expenses related to the COVID-19 pandemic and believe $5.0 to $8.0 million in estimated costs from production inefficiencies for the year ended December 31, 2020. We cannot predict if there will be further significant disruptions beyond our control, including quarantines and customer work stoppages, significant force majeure declarations by our suppliers or other equipment providers material to our projects.

We have also noticed an impact of COVID-19 in adding new projects to our backlog. Our bidding activity continues at very high levels, but the final approval process for some projects has been slowed due to COVID-19. Despite that, we were able to maintain a relatively consistent total backlog for 2020 compared to 2019.

We are still evaluating the effects that the vaccination and new strains of COVID-19 may have on the current construction business. Therefore, we are continuing to take actions to preserve our liquidity such as limiting our hiring and delaying spending on non-critical initiatives. At this point, we do not believe that COVID-19 is having a negative impact on our liquidity. We could see a change in this status if we experience future work stoppages at our projects which would prevent us from billing customers for new work performed. If the federal, state and local governments proceed with more restrictive measures, and our customers determine to stop work or terminate projects, these actions would negatively impact our business, results of operations, liquidity and prospects. In addition, the Company is unable to predict any changes in the market for bonding by our sureties.

Current Year Financial Highlights

Key financial results for the year ended December 31, 2020 include:

Consolidated revenues increased 20.1% to $1.8 billion as compared to $1.5 billion for the year ended December 31, 2019, of which 65.2% was attributable to the Renewables segment and 34.8% was attributable to the Specialty Civil segment;

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Operating income increased 104.8%, or $38.6 million, to $75.4 million as compared to $36.8 million for the year ended December 31, 2019;

Operating income as a percentage of revenue also increased significantly at December 31, 2020 to 4.3% compared to 2.5% for the year ended December 31, 2019;

Net income decreased 88.3%, or $5.5 million, to $0.7 million as compared to $6.2 million for the year ended December 31, 2019. Included in the net income for December 31, 2019, was a $23.1 million contingency gain; and

Diluted loss per share increased 90.7%, or $0.88, to $(0.09) as compared to $(0.97) for the year ended December 31, 2019.

2020 Trends and Future Opportunities

Renewables Segment

During 2020, results of the Renewables segment were impacted by the following significant operational trends:

In late 2019, the Production Tax Credit (“PTC”) was extended for one year, which increased customer demand to complete construction on more projects for 2020. The extension provided a pull forward of the 2020 quarterly revenue timing.
The locations of our construction projects in 2020 experienced more favorable weather conditions, which provided for less construction delays.
Our consistent, safe and reliable performance with our customers on our wind projects have allowed us to further expand our services into the solar market.

We have maintained a heavy focus on construction of renewable power production capacity as renewable energy, particularly from wind and solar, has become widely accepted within the electric utility industry and has become a cost-effective solution for the creation of new generating capacity. We believe that this shift coupled with the below, will continue to drive opportunity in this segment over the long-term:

The current administration has a goal of investing $2 trillion in modern, sustainable, and clean energy infrastructure,

Renewable energy power generation has reached a level of scale and maturity that permits these technologies to now be cost-effective competitors to more traditional power generation technologies, including on an unsubsidized basis. The most significant changes have been related to increased turbine sizes and better battery storage methods.

Over 40 states and the District of Colombia have adopted renewable portfolio standards for clean energy,

In December 2020, there was a one year extension of the PTC at 60% for projects that begin construction prior to December 31, 2021 and a two year extension of 26% Solar Investment Tax Credit (“ITC”) to 2022 (22% credit extended through 2023).

As a result, wind and solar power are among the leading sources of new power generation capacity in the U.S., and the Company does not anticipate this trend to change in the near future as we are continuing to see growth through new awards in our backlog:

(in millions)
SegmentDecember 31, 2019
New Awards in 2020(1)
Revenue Recognized in 2020
Backlog at December 31, 2020(2)
Renewables$1,582.5 $1,073.7 $1,142.8 $1,513.4 
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(1) New awards consist of the original contract price of projects added to our backlog plus or minus subsequent changes to the estimated total contract price of existing contracts.

(2) Backlog may differ from the transaction prices allocated to the remaining performance obligations as disclosed in Note 1. Business, Basis of Presentation and Significant Accounting Policies in Item 8. Such differences relate to the timing of executing a formal contract or receiving a notice to proceed. More specifically, backlog sometimes may include awards for which a contract has not yet been executed or a notice to proceed has not been issued, but for which there are no remaining major uncertainties that the project will proceed (e.g., adequate funding is in place).

Specialty Civil Segment

During 2020, our results of the Specialty Civil segment was impacted by the following significant operational trends:

The COVID-19 pandemic impacted certain aspects of our projects in the rail and environmental remediation end markets:

negatively impacted the budgets of some of our customers which led to uncertainty and further delays on portions of our large rail jobs; and

increased the timing needed to obtain governmental approvals and environmental permitting that affected the start and bidding opportunities of certain environmental remediation and rail projects.

Competition increased in a few of our end markets which led to lower margins on certain heavy civil construction projects reducing overall profitability.

Despite the delays in project starts mentioned above we continued to see a strong bidding environment over the course of 2020 and had significant awarded projects related to:

The rail market started two sizeable projects that will continue with consistent revenue through 2024; and

The heavy civil construction market was consistent year over year for awarded projects.

We believe that our business relationships with customers in these sectors are excellent and the strong reputation that our acquired companies have built has provided us with the right foundation to continue to grow our revenue base. The drivers to further growing this segment our as follows:

The FMI 2021 Overview Report published in the first quarter of 2021 projects that nonresidential construction put in place for the United States will be over $500 billion per year from 2021 to 2024.

Fast Act extension and highway trust fund infusion of $13.6 billion for the highway and transit account.

According to the American Coal Ash Association, coal combustion residuals “CCRs” or “coal ash” are produced by coal-fired power plants and represent one of the largest categories of industrial waste in the U.S., as 78.6 million tons of CCRs were produced in 2019. The Company anticipates this could be a $50.0 billion industry over the next ten years.

Additionally, there is significant overlap in labor, skills and equipment needs between our Renewables segment and our Specialty Civil segment, which we expect will continue to provide us with operating efficiencies as we continue to expand this sector. The Company continues to cross leverage these two segments and continues to see future growth through new awards in our backlog:

(in millions)
SegmentDecember 31, 2019
New Awards in 2020(1)
Revenue Recognized in 2020
Backlog at December 31, 2020(2)
Specialty Civil$588.7 $577.5 $610.1 $556.1 
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(1) New awards consist of the original contract price of projects added to our backlog plus or minus subsequent changes to the estimated total contract price of existing contracts.

(2) Backlog may differ from the transaction prices allocated to the remaining performance obligations as disclosed in Note 1. Business, Basis of Presentation and Significant Accounting Policies in Item 8. Such differences relate to the timing of executing a formal contract or receiving a notice to proceed. More specifically, backlog sometimes may include awards for which a contract has not yet been executed or a notice to proceed has not been issued, but for which there are no remaining major uncertainties that the project will proceed (e.g., adequate funding is in place).

Backlog

    See Backlog on Item 1. Business.    

Significant Factors Impacting Results

Our revenues, margins and other results of operations can be influenced by a variety of factors in any given period, including those described in Item 1A. Risk Factors and in Results of Operations and Forward Looking Statements, and those factors have caused fluctuations in our results in the past and are expected to cause fluctuations in our results in the future. Additional information with respect to certain of those factors is provided below.

Seasonality. Typically, our revenues are lowest in the first quarter of the year because cold, snowy or wet conditions can create challenging working environments that are more costly for our customers or cause delays on projects. In addition, infrastructure projects often do not begin in a meaningful way until our customers finalize their capital budgets, which typically occurs during the first quarter. Second quarter revenues are typically higher than those in the first quarter, as some projects begin, but continued cold and wet weather can often impact productivity. Third quarter revenues are typically the highest of the year, as a greater number of projects are underway and operating conditions, including weather, are normally more accommodating. Generally, revenues during the fourth quarter are lower than the third quarter but higher than the second quarter, as many projects are completed and customers often seek to spend their capital budgets before year end. However, the holiday season and inclement weather can sometimes cause delays during the fourth quarter, reducing revenues and increasing costs.
Our revenue and results of operations for our Specialty Civil segment are also effected by seasonality but to a lesser extent as these projects are more geographically diverse and located in less severe weather areas. While the first and second quarter revenues are typically lower than the third and fourth quarter, the geographical diversity has allowed this segment to be less seasonal over the course of the year.

Weather and Natural Disasters. The results of our business in a given period can be impacted by adverse weather conditions, severe weather events or natural disasters, which include, among other things, heavy or prolonged snowfall or rainfall, hurricanes, tropical storms, tornadoes, floods, blizzards, extreme temperatures, wildfires, pandemics and earthquakes. These conditions and events can negatively impact our financial results due to the termination, deferral or delay of projects, reduced productivity and exposure to significant liabilities.

Cyclical demand. Fluctuations in end-user demand within the industries we serve, or in the supply of services within those industries, can impact demand for our services. As a result, our business may be adversely affected by industry declines or by delays in new projects. Variations in project schedules or unanticipated changes in project schedules, in particular, in connection with large construction and installation projects, can create fluctuations in revenue, which may adversely affect us in a given period. In addition, revenue from master service agreements, while generally predictable, can be subject to volatility. The financial condition of our customers and their access to capital, variations in project margins, regional, national and global economic, political and market conditions, regulatory or environmental influences, and acquisitions, dispositions or strategic investments can also materially affect quarterly results. Accordingly, our operating results in any particular period may not be indicative of the results that can be expected for any other period.

Revenue mix. The mix of revenues based on the types of services we provide in a given period will impact margins, as certain industries and services provide higher-margin opportunities. Revenue derived from projects billed on a fixed-price basis totaled 97.7% for the year ended December 31, 2020. Revenue and related costs for construction 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 2.3% of consolidated revenue for the year ended December 31, 2020.

Size, scope and complexity of projects. Larger or more complex projects with design or construction complexities; more difficult terrain requirements; or longer distance requirements typically yield opportunities for higher margins as we
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assume a greater degree of performance risk and there is greater utilization of our resources for longer construction timeframes. Furthermore, smaller or less complex projects typically have a greater number of companies competing for them, and competitors at times may more aggressively pursue available work. A greater percentage of smaller scale or less complex work also could negatively impact margins due to the inefficiency of transitioning between a larger number of smaller projects versus continuous production on fewer larger projects. Also, at times we may choose to maintain a portion of our workforce and equipment in an underutilized capacity to ensure we are strategically positioned to deliver on larger projects when they move forward.

Project variability and performance. Margins for a single project may fluctuate period to period due to changes in the volume or type of work performed, the pricing structure under the project contract or job productivity. Additionally, our productivity and performance on a project can vary period to period based on a number of factors, including unexpected project difficulties or site conditions; project location, including locations with challenging operating conditions; whether the work is on an open or encumbered right of way; inclement weather or severe weather events; environmental restrictions or regulatory delays; protests, other political activity or legal challenges related to a project; and the performance of third parties.

Subcontract work and provision of materials. Work that is subcontracted to other service providers generally yields lower margins, and therefore an increase in subcontract work in a given period can decrease margins. Our customers are usually responsible for supplying the materials for their projects; however, under some contracts we agree to procure all or part of the required materials. Margins may be lower on projects where we furnish a significant amount of materials, including projects where we provide engineering, procurement and construction ("EPC") services, as our markup on materials is generally lower than our markup on labor costs. Furthermore, fluctuations in the price of materials we procure, including as a result of changes in U.S. or global trade relationships or other economic or political conditions, may impact our margins. In a given period, an increase in the percentage of work with higher materials procurement requirements may decrease our overall margins.

Results of Operations

A discussion of results of operations changes between the years ended December 31, 2019 and 2018 is included below if changes were deemed significant and all other changes were in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the SEC on March 12, 2020.

Comparison of Years Ended December 31, 2020 and 2019

    The following table reflects our consolidated results of operations in dollar and percentage of revenue terms for the periods indicated:
Year Ended December 31,Change
(in thousands, except percentages)20202019$%
Revenue$1,752,905 100.0 %$1,459,763 100.0 %293,142 20.1 
Cost of revenue1,564,213 89.2 %1,302,746 89.2 %261,467 20.1 
Gross profit188,692 10.8 %157,017 10.8 %31,675 20.2 
Selling, general and administrative expenses113,266 6.5 %120,186 8.2 %(6,920)(5.8)
Income from operations75,426 4.3 %36,831 2.5 %38,595 104.8 
Other income (expense), net:
Interest expense, net(61,689)(3.5)%(51,260)(3.5)%(10,429)20.3 
Contingent consideration fair value adjustment— — %23,082 1.6 %(23,082)100.0 
Other expense(429)— %(4,043)(0.3)%3,614 (89.4)
Income before income taxes13,308 0.8 %4,610 0.3 %8,698 188.7 
(Provision) benefit for income taxes(12,580)(0.7)%1,621 0.1 %(14,201)(876.1)
Net income$728 — %$6,231 0.4 %(5,503)(88.3)

See Segment Results, below, for a discussion of Revenue and Gross profit.

Revenue. Revenue increased by 20.1%, or $293.1 million, during the year ended December 31, 2020 as compared to 2019.

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Gross profit. Gross profit increased by 20.2%, or $31.7 million, during the year ended December 31, 2020 as compared to 2019.

Selling, general and administrative expenses. Selling, general and administrative expenses decreased by 5.8%, or $6.9 million, during the year ended December 31, 2020 as compared to 2019. Selling, general and administrative expenses were 6.5% of revenue for the year ended December 31, 2020, compared to 8.2% for 2019. The decrease in selling, general and administrative expenses was primarily driven by cost decreases in 2020 compared to 2019 for:

Acquisitions costs of $8.9 million were incurred in 2019 related to our purchase of CCS and William Charles,
Staff related benefit costs decreased $2.7 million, and
Business travel costs of $2.1 million decreased in 2020 due to Company mandate to adhere to state and national COVID-19 protocols.

The reductions above were partially offset by expense increases for:

Outside service fees increased $4.6 million in 2020 due to an increase in legal fees and consulting fees related to equity transactions, and
Information technology expenses increased $2.6 million in 2020 due to an increase of field employees and mobile field sites, as well as work from home setups for office employees.

Interest expense, net. Interest expense increased by 20.3%, or $10.4 million, during the year ended December 31, 2020 as compared to 2019. This increase was driven by an increase in Series B Preferred Stock dividends of $25.4 million partially offset by a reduction of interest expense related to the Company's credit facility of $14.0 million.

Contingent consideration fair value adjustment. The Merger agreement required the Company to issue additional shares of our Common Stock to the Seller if certain financial targets for 2019 were achieved. The financial targets were not achieved. Therefore, the Company recorded a fair value adjustment of $23.1 million at the end of 2019, to remove the remaining liability for the contingent consideration.
Other expense. Other expense decreased by 89.4%, or $3.6 million, during the year ended December 31, 2020 as compared to 2019, primarily related to the fair value adjustment on the anti-dilution warrants related to the potential issue of common stock for the conversion of the Series A Preferred shares.

(Provision) benefit for income taxes. Income tax expense increased by 876.1%, or $14.2 million, during the year ended December 31, 2020, compared to 2019. The effective tax rates for the years ended December 31, 2020 and 2019 were 94.5% and 35.2%, respectively. The higher effective tax rate in 2020 was primarily attributable to dividends on the Series B Preferred Stock, which are treated as interest expense but not deductible for taxes.

Segment Results

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

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The following table sets forth segment revenues and gross profit for the years indicated, as well as the dollar and percentage change from the prior year:
Year Ended December 31,
(in thousands)20202019Change
SegmentRevenue% of Total RevenueRevenue% of Total Revenue$%
Renewables$1,142,842 65.2 %$834,029 57.1 %308,813 37.0 %
Specialty Civil610,063 34.8 %625,734 42.9 %(15,671)(2.5)%
Total revenue$1,752,905 100.0 %$1,459,763 100.0 %$293,142 20.1 %


Years ended December 31,
(in thousands)20202019Change
SegmentGross ProfitGross Profit MarginGross ProfitGross Profit Margin$%
Renewables$126,919 11.1 %$88,309 10.6 %38,610 43.7 %
Specialty Civil61,773 10.1 %68,708 11.0 %(6,935)(10.1)%
Total gross profit$188,692 10.8 %$157,017 10.8 %$31,675 20.2 %

Renewables Segment Results

Revenue. Renewables revenue was $1,142.8 million for the year ended December 31, 2020 as compared to $834.0 million for 2019, an increase of 37.0%, or $308.8 million. The increase in revenue was primarily due to an increase in customer demand from the extension of the PTC credit, which increased the number of wind projects in construction during the year, coupled with further increased growth in the Solar market during 2020:

The increased customer demand allowed the company to construct 28 projects of greater than $5.0 million of revenue in 2020 compared to only 23 projects during 2019,
The average value of the 28 projects was $40.1 million in 2020 compared to $37.1 million related to the 23 projects during 2019, and
Solar revenue increased $106.3 million for the year ended December 31, 2020 when compared to 2019.

Gross profit. Renewables gross profit was $126.9 million for the year ended December 31, 2020 as compared to $88.3 million for 2019, an increase of 43.7%, or $38.6 million. As a percentage of revenue, gross profit was 11.1% in 2020, as compared to 10.6% in 2019. The increase was primarily attributable to the following:

Projects generated greater gross margins due to more favorable weather conditions which led to less project delays.
The year ended December 31, 2019, also had lower gross margins related to completing construction on projects that were significantly impacted by weather in 2018.

Specialty Civil Segment Results

Revenue. Specialty Civil revenue was $610.1 million for the year ended December 31, 2020 as compared to $625.7 million for 2019, a decrease of 2.5%, or $15.7 million. The decrease in revenue was primarily due to the delay of certain projects in the rail and environmental remediation end markets, offset by higher revenue from our construction project mix in the heavy civil market as compared to 2019:

Rail and environmental remediation markets experienced a decrease in revenue primarily due to delay in project starts for utilities and railroads coupled with delays in obtaining environmental permit approvals,
Offsetting the decrease in revenue was a slight increase in our heavy civil construction mix of projects.

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Gross profit. Specialty Civil gross profit was $61.8 million for the year ended December 31, 2020 as compared to $68.7 million for 2019, a decrease of (10.1)%, or $6.9 million. As a percentage of revenue, gross profit was 10.1% in 2020, as compared to 11.0% in 2019. The decrease was primarily attributable to the mix of our projects in 2020 compared to 2019. In 2020, the Company had lower gross margin due to the mix of the projects as there were more heavy civil construction projects which typically generate lower gross margins then our rail and environmental remediation markets.

Liquidity and Capital Resources

    Liquidity is provided by available cash balances, cash generated from operations, availability under our credit facility and access to capital markets. We have a committed line of credit totaling $75.0 million, which may be used for revolving loans, letters of credit and/or general purposes. We believe the cash generated from operations, along with our unused credit capacity of $67.2 million and available cash balances as of December 31, 2020, will be sufficient to fund any working capital needs for the next 12 months and beyond.

To the extent that cash from operations and borrowings under our revolving credit facility are not sufficient to meet our liquidity needs in the next twelve months, we expect to access other sources of liquidity through alternative sources such as issuance of debt and equity securities, expansions of our credit facility or other sources. There can be no assurance that any such sources will be available or if they are available that we can obtain capital from such sources on commercially reasonable terms.

Working Capital

    We require working capital to support seasonal variations in our business, primarily due to the effect of weather conditions on external construction and maintenance work and the spending patterns of our customers, both of which influence the timing of associated spending to support related customer demand. Our business is typically slower in the first quarter of each calendar year. Working capital needs are generally lower during the spring when projects are awarded and we receive down payments from customers. Conversely, working capital needs generally increase during the summer or fall months due to increased demand for our services when favorable weather conditions exist in many of the regions in which we operate. Working capital needs are typically lower and working capital is converted to cash during the winter months. These seasonal trends, however, can be offset by changes in the timing of projects, which can be affected by project delays or accelerations and/or other factors that may affect customer spending.

Sources and Uses of Cash

    Sources and uses of cash are summarized below for the periods indicated:
Year Ended December 31,
(in thousands)20202019
Net cash provided by operating activities$57,745 $79,812 
Net cash provided by (used in) investing activities(3,113)610 
Net cash (used in) financing activities(37,850)(4,474)

    Operating Activities. Net cash provided by operating activities for the year ended December 31, 2020 was $57.7 million as compared to $79.8 million for 2019. The $22.1 million decrease in operating cash flow for the year ended December 31, 2020 as compared to 2019 was attributable to the timing of receipts from customers and payments to vendors in the ordinary course of business. The decrease is primarily attributable to $183.6 million more cash collected for accounts receivable and contract assets, offset by $239.9 million more cash paid for accounts payable and contract liabilities.

    Investing Activities. Net cash used in investing activities for the year ended December 31, 2020 was $3.1 million as compared to net cash provided by investing activities of $0.6 million for 2019. The primary increase of net cash used in investing activities was mainly due to $9.7 million of purchases of property, plant and equipment in 2020 compared to $6.8 million spent in 2019.

    Financing Activities. Net cash used by financing activities for the year ended December 31, 2020 was $37.9 million as compared to $4.5 million for 2019. The $33.4 million decrease in cash for financing activities in 2020 compared to 2019 was primarily attributable to a reduction of proceeds from net debt and Series B Preferred Stock of $11.5 million for 2020 compared to $8.8 million in 2019, coupled with a reduction of proceeds from sale leaseback transactions of $24.3 million that occurred in 2019.
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Capital Expenditures

    For the year ended December 31, 2020, we incurred $26.2 million in finance lease principal payments and an additional $9.7 million in cash purchases. We estimate that we will spend approximately two percent of revenue for capital expenditures in 2020. Actual capital expenditures may increase or decrease in the future depending upon business activity levels, as well as ongoing assessments of equipment lease versus buy decisions based on short and long-term equipment requirements.

Debt

Third A&R Credit Agreement

On May 20, 2019, the Third A&R Credit Agreement (the “Third A&R Credit Agreement”) became effective. The Third A&R Credit Agreement bifurcated the remaining principal amount of the initial term loan facility of $300.0 million (the “Initial Term Loan”). The Third A&R Credit Agreements leaves in place the revolving credit facility of $50.0 million (the “Initial Revolving Facility”), which provides for swing line loans of up to $20.0 million (“Swing Line Loans”) and standby and commercial letters of credit. Obligations under the Third A&R Credit Agreement are guaranteed by all of the present and future assets, and those of Intermediate Holdings (as defined therein) and the Subsidiary Guarantors (as defined therein), subject to customary carve-outs.

Interest on the term loan tranche accrues at a per annum rate of, at the Company's option, (x) LIBOR plus a margin of 8.25% or (y) an alternate base rate plus a margin of 7.25%; provided, however, that upon achieving a First Lien Net Leverage Ratio (as defined below) of no greater than 2.67:1.00, the margin shall permanently step down to (y) for LIBOR loans, 6.75% and (x) for alternative base rate loans, 5.75%. Interest on Initial Revolving Facility borrowings and Swing Line Loans accrues at a rate of, at the Company's option, (x) LIBOR plus a margin of 4.25% or (y) the applicable base rate plus a margin of 3.25%. Default interest will accrue on the obligations at the otherwise applicable rate plus 3%.

The Initial Revolving Facility is required to be repaid and terminated on September 25, 2023. Borrowings under the Initial Revolving Facility may be paid and reborrowed. The Initial Term Loan matures on September 25, 2024. Borrowings under the Initial Term Loan are required to be repaid on the last business day of each March, June, September and December, continuing with the first fiscal quarter following the effective date of the Third A&R Credit Agreement, in an amount equal to 2.5% of the initial balance of the Initial Term Loan and may not be reborrowed.

Beginning with 2020, an additional annual payment of a percentage of Excess Cash Flow (as defined in the Third A&R Credit Agreement) over the prior year is required on the Initial Term Loan depending upon the First Lien Net Leverage Ratio as of the last day of such year. The First Lien Net Leverage Ratio is defined as the ratio of: (A) the excess of (i) consolidated total debt that, as of such date, is secured by a lien on any of our asset or property or of any restricted subsidiary that is not expressly subordinated to the lien securing the obligations under the Third A&R Credit Agreement, over (ii) certain net cash as of such date not to exceed $50,000,000, to (B) consolidated EBITDA, calculated on a pro forma basis for the most recently completed measurement period. The required payment percentage of Excess Cash Flow depending upon the First Lien Net Leverage Ratio will be as follows:

Required Payment AmountRatio
100% of Excess Cash FlowGreater than 5.00 : 1.00
75% of Excess Cash FlowLess than or equal to 5.00 : 1.00 but greater than 1.76 : 1.00
50% of Excess Cash FlowLess than or equal to 1.76 : 1.00 but greater than 1.26 : 1.00
25% of Excess Cash FlowLess than or equal to 1.26 : 1.00 but greater than 0.76 : 1.00
0% of Excess Cash FlowLess than or equal to 0.76 : 1.00

Under the Third A&R Credit Agreement, the Company is required to not permit the First Lien Net Leverage Ratio, as of the last day of any consecutive four fiscal quarter period to be greater than:
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Measurement PeriodRatio
From and after fiscal quarter ending March 31, 2019 through December 31, 20194.75 : 1.00
From and after fiscal quarter ending March 31, 2020 through December 31, 20203.50 : 1.00
From and after fiscal quarter ending March 31, 2021 through December 31, 20212.75 : 1.00
From and after the fiscal quarter ending March 31, 20222.25 : 1.00
Amendment to Third A&R Credit Agreement

On October 30, 2020, the Company entered into a First Amendment to its Third A&R Credit Agreement (the “Amendment”). The Amendment provides for, among other things, an increase in the revolving credit commitments to $75.0 million.

In addition, the Amendment provides that after October 30, 2020 and until delivery of the financial statements for the fiscal quarter ended December 31, 2020, the percentage per annum interest rate for revolving loans and swing line loans is, at the Company’s option, (x) LIBOR plus a margin of 2.75% or (y) the applicable base rate plus a margin of 1.75%. Thereafter, for any day, the applicable percentage per annum interest rate for revolving loans and swing line loans is LIBOR or the base rate plus a margin depending upon the Company’s first lien net leverage ratio as of the last day of the most recently ended consecutive four fiscal quarter period, as set forth below:

First Lien Net Leverage RatioLIBOR LoansBase Rate Loans
Less than 1.00:1.002.50%1.50%
Less than 2.00:1.00 but greater than or equal to 1.00:1.002.75%1.75%
Less than 3.00:1.00 but greater than or equal to 2.00:1.003.00%2.00%
Less than 3.50:1.00 but greater than or equal to 3.00:1.003.25%2.25%
Greater than or equal to 3.50:1.003.50%2.50%

The Amendment also further specifies the unused commitment fee rate. On and after the Amendment’s effective date and until delivery of the financial statements for the fiscal quarter ended December 31, 2020, as required under the Amendment, the rate is 0.40% per annum. Thereafter, for any day, the applicable percentage per annum depends upon the Company’s senior secured net leverage ratio, as set forth below:

Senior Secured Net Leverage RatioApplicable Unused Commitment Fee Rate
Less than 1.00:1.000.35%
Less than 2.00:1.00 but greater than or equal to 1.00:1.00.40%
Less than 3.00:1.00 but greater than or equal to 2.00:1.000.45%
Greater than or equal to 3.00:1.000.50%

We were in compliance with the provisions and covenants contained in our outstanding debt instruments as of December 31, 2020.

Series A Preferred Stock

As of December 31, 2020, we had 17,483 shares of Series A Preferred Stock with a stated value of $1,000 per share plus accumulated dividends. Dividends are paid on the Series A Preferred Stock as, if and when declared by our Board. To extent permitted and only as, if and when declared by our Board, dividends are required to be paid in cash quarterly in arrears on each March 31, June 30, September 30 and December 31 on the stated value at a rate of 10% per annum.

    The Company did not pay any dividends in cash for any quarter in 2020, on the Series A Preferred Stock and therefore dividends accrued on the stated value and increased the stated value on and effective as of the applicable dividend date without any further action by the Board at 12% per annum.

    So long as any shares of Series B Preferred Stock of the Company are currently outstanding or from and after the occurrence of any non-payment event or default event and until cured or waived, the foregoing rates will increase by 2% per annum.
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    As of December 31, 2020, the Company has accrued a cumulative of $4.4 million in dividends to holders of Series A Preferred Stock as a reduction to additional paid-in capital.

Series B Preferred Stock

In 2019, the Company entered into three equity agreements with Ares Management, LLC, on behalf of its affiliated funds, investment vehicles and/or managed accounts (“Ares”) and funds managed by Oaktree Capital Management (“Oaktree”). These resulted in Series B-1 Preferred Stock (the “Series B-1 Preferred Stock”), Series B-2 Preferred Stock (the “Series B-2 Preferred Stock”) and Series B-3 Preferred Stock (the “Series B-3 Preferred Stock”) (collectively referred to as “Series B Preferred Stock”). The Series B Preferred Stock is a mandatorily redeemable financial instrument under ASC Topic 480 and has been recorded as a liability using the effective interest rate method for each tranche. The mandatory redemption date for all tranches of the Series B Preferred is February 15, 2025.

As of December 31, 2020, we had 199,474 shares of Series B Preferred Stock outstanding, with each share having an initial stated value of $1,000 plus accumulated but unpaid dividends. Our Common Stock and Series A Preferred Stock are junior to the Series B Preferred Stock. Dividends are paid on the Series B Preferred Stock only as, if and when declared by our Board.

The Series B Preferred Stock requires quarterly dividend payments calculated at a 12% annual rate on all outstanding Series B Preferred Stock when the Company’s First Lien Net Leverage Ratio (as defined in the Third A&R Credit Agreement) is less than or equal to 1.50:1.0 and a 13.5% rate if the ratio if greater. The Series B Preferred Stock agreements allow the Company to accrue, but not pay, the dividends at a 15.0% annual rate. Accrued dividends increase the amount of Series B Preferred Stock. Accrued dividends were $18.3 million at December 31, 2020. Prior to June 30, 2020, the Company accrued its Series B Preferred Stock payments; the June 30, September 30, and December 31, 2020 payments were made in cash. Dividend payments are not deductible in calculating the Company’s federal and state income taxes.

Deferred Taxes - COVID-19

The CARES Act was enacted on March 27, 2020, in response to the COVID-19 emergency. The CARES Act includes many measures to assist companies, including temporary changes to income and non-income-based tax laws. Some of the key income tax-related provisions of the CARES Act include:

Eliminating the 80% of taxable income limitation by allowing corporate entities to fully utilize net operating losses (“NOLs”) to offset taxable income in 2018, 2019 or 2020

Allowing NOLs originating in 2018, 2019 or 2020 to be carried back five years

Increasing the net interest expense deduction limit to 50% of adjusted taxable income from 30% for tax years beginning 1 January 2019 and 2020

Allowing taxpayers with alternative minimum tax (“AMT”) credits to claim a refund in 2020 for the entire amount of the credit instead of recovering the credit through refunds over a period of years, as originally enacted by the Tax Cuts and Jobs Act (“TCJA”)

Payroll tax deferral

The new NOL carryforward and interest expense deduction rules are favorable for the Company and will help defer future cash tax liabilities. The Company has filed an election to refund $0.5 million AMT credit in April 2020 that was received in the third quarter.

The Company has also made use of the payroll deferral provision to defer the 6.2% social security tax, which is approximately $13.6 million through December 31, 2020. This amount is required to be paid at 50% on each of December 31, 2021 and December 31, 2022.
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Contractual Obligations

    The following table sets forth our contractual obligations and commitments for the periods indicated as of December 31, 2020:
Payments due by period
(in thousands)Total20212022202320242025Thereafter
Debt (principal)(1)
$178,927 $2,506 $16,938 $29,986 $129,368 $129 $— 
Debt (interest)(2)
41,248 12,365 12,109 10,361 6,409 — 
Debt - Series B Preferred Stock(3)
199,474 — — — — 199,474 — 
Dividends - Series B Preferred Stock(4)
125,853 26,113 26,113 26,113 26,113 21,401 
Finance leases(5)
60,806 27,391 22,161 6,946 2,847 1,461 — 
Operating leases(6)
51,666 11,162 9,372 7,022 3,461 1,751 18,898 
Total$657,974 $79,537 $86,693 $80,428 $168,198 $224,220 $18,898 
(1)Represents the contractual principal payment due dates on our outstanding debt.
(2)Includes variable rate interest using December 31, 2020 rates.
(3)Represents the mandatorily redeemable debt - Series B Preferred with expected redemption date of February 15, 2025.
(4)Future declared dividends have been included at 12% but payment determination will be evaluated each quarter resulting in differing accumulated dividend rates.
(5)We have obligations, including associated interest, recognized under various finance leases for equipment totaling $60.8 million at December 31, 2020. Net amounts recognized within property, plant and equipment, net in the condensed consolidated balance sheet under these financed lease agreements at December 31, 2020 totaled $72.9 million.
(6)We lease real estate, vehicles, office equipment and certain construction equipment from unrelated parties under non-cancelable leases. Lease terms range from month-to-month to terms expiring through 2038.

Off-Balance Sheet Arrangements

    As is common in our industry, we have entered into certain off-balance sheet arrangements in the ordinary course of business. Our significant off-balance sheet transactions include liabilities associated with letter of credit obligations, surety and performance and payment bonds entered into in the normal course of business, liabilities associated with deferred compensation plans and liabilities associated with certain indemnification and guarantee arrangements.

Letters of Credit and Surety Bonds

    In the ordinary course of business, we 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, we would be required to reimburse the issuer, which, depending upon the circumstances, could result in a charge to earnings. As of December 31, 2020 and 2019, we were contingently liable under letters of credit issued under our respective revolving lines of credit in the amount of $7.8 million and $21.0 million, respectively, related to projects. In addition, as of December 31, 2020 and 2019, we had outstanding surety bonds on projects of $2.8 billion and $2.4 billion. We anticipate that our current bonding capacity will be sufficient for the next twelve months based on current backlog and available capacity.

See Note 9. Commitments and Contingencies to our consolidated financial statements for further discussion pertaining to certain of our off-balance sheet arrangements.

Critical Accounting Policies and Estimates

    This management’s discussion and analysis of our financial condition and results of operations is based upon IEA’s consolidated financial statements included in Item 8, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires the use of estimates and assumptions that affect the amounts reported in our consolidated financial statements and the accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Given that
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management estimates, by their nature, involve judgments regarding future uncertainties, actual results may differ from these estimates if conditions change or if certain key assumptions used in making these estimates ultimately prove to be inaccurate. For discussion of all of our significant accounting policies, see Note 1. Business, Basis of Presentation and Significant Accounting Policies to our consolidated financial statements.

    We believe that the accounting policies described below are the most critical in the preparation of our consolidated financial statements as they are important to the portrayal of our financial condition and require significant or complex judgment and estimates on the part of management.

Revenue Recognition for Projects

    The Company adopted the requirements of Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers, which is also referred to as Accounting Standards Codification (“ASC”) Topic 606, under the modified retrospective transition approach effective January 1, 2019, with application to all existing contracts that were not substantially completed as of January 1, 2019.

Contracts
    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, time and materials, or unit price. Generally, renewable energy projects are performed for private customers while Specialty Civil projects are performed for various governmental entities.
    Revenue from construction contracts is recognized over time using the cost-to-cost measure of progress. For these contracts, the cost-to-cost measure of progress best depicts the continuous transfer of control of goods or services to the customer. Such contracts provide that the customer accept completion of progress to date and compensate the Company for services rendered.
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 consolidated 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 Topic 606. 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 a 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.
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    Remaining performance obligations represent the amount of unearned transaction prices for fixed price contracts and open purchase orders for which work is wholly or partially unperformed. As of December 31, 2020, the amount of the Company’s remaining performance obligations was $1,328.0 million. The Company expects to recognize approximately 83.1% of its remaining performance obligations as revenue in 2020, with the remainder recognized primarily in 2021. Revenue recognized from performance obligations satisfied in previous periods was $(10.0) million and $11.3 million for the years ended December 31, 2020 and 2019, 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 estimates of variable consideration and determination of whether to include estimated amounts in transaction price are based on past practices with the customer, specific discussions, correspondence or preliminary negotiations with the customer, legal evaluations 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 transaction price are not resolved in the Company’s favor, or to the extent incentives reflected in transaction price are not earned, there could be reductions in, or reversals of, previously recognized revenue.

    As of December 31, 2020 and 2019 , the Company included approximately $52.6 million and $73.3 million, respectively, on unapproved change orders and/or claims in the transaction price for certain contracts that were in the process of being resolved in the normal course of business, including through negotiation, arbitration and other proceedings. These transaction price adjustments are included within Contract Assets or Contract Liabilities as appropriate. The Company actively engages with its customers to complete the final approval process, and generally expects these processes to be completed within one year. Amounts ultimately realized upon final acceptance by customers could be higher or lower than such estimated amounts.

Goodwill

    We have goodwill that has been recorded in connection with our businesses. For the year ended December 31, 2020, management performed a qualitative assessment for its Renewable Segment goodwill by examining relevant events and circumstances that could have an effect on its fair value, such as macroeconomic conditions, industry and market conditions, entity-specific events, financial performance and other relevant factors or events that could affect earnings and cash flows. Based on evaluation of these qualitative assessments, it was determined that there was no goodwill impairment for these years.

In our Specialty Civil segment, we valued these reporting units using a weighted combination of the income and market approaches. The critical assumptions that factored into the valuations are the projected future revenues and profitability of the reporting units, their long-term growth rates, the discount rate used to present value the future cash flows and the valuation multiples derived from a set of guideline public companies. The test determined that goodwill was not impaired since the estimated fair value of each reporting unit exceeded its net book value. There can be no assurance that a future goodwill impairment doesn't exist if future events are less favorable than what we assumed or estimated in our impairment analysis.

Impairment of Property, Plant and Equipment and Intangibles

    We review long-lived assets that are held and used for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset are compared with the asset’s carrying amount to determine if there has been an impairment, which is calculated as the difference between the fair value of an asset and its carrying value. Estimates of future undiscounted cash flows are based on expected growth rates for the business, anticipated future economic conditions and estimates of residual values. Fair values take into consideration management’s estimates of risk-adjusted discount rates, which are believed to be consistent with assumptions that market participants would use in their estimates of fair value. There were no impairments of property, plant and equipment or intangible assets recognized during the years ended December 31, 2020, 2019 and 2018.

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“Emerging Growth Company” Status

    As of December 31, 2019, the Company's total annual gross revenues exceed $1.07 billion and we are no longer an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”). See Note 1. Business, Basis of Presentation and Significant Accounting Policies to our consolidated financial statements for more information.

Recently Issued Accounting Pronouncements

    See Note 1. Business, Basis of Presentation and Significant Accounting Policies to our consolidated financial statements included in this Annual Report on 10-K for disclosures concerning recently issued accounting standards. These disclosures are incorporated herein by reference.

Quarterly Financial Information (Unaudited)

    Summarized quarterly results of operations for the year ended December 31, 2020 were as follows:
($ in thousands, except per share data)First QuarterSecond QuarterThird QuarterFourth Quarter
Revenue$358,163 $480,604 $522,232 $391,906 
Gross profit33,041 54,241 58,889 42,521 
(Loss) income from operations3,557 26,167 29,233 16,469 
Net (loss) income(12,743)3,597 11,266 (1,392)
Less: Convertible preferred share dividends(766)(606)(619)(637)
Less: Net income allocated to participating securities— (802)(2,854)— 
Net income (loss) available to common stockholders$(13,509)$2,189 $7,793 $(2,029)
Net (loss) income per common share - basic$(0.66)$0.11 $0.37 $(0.10)
Net (loss) income per common share - diluted$(0.66)$0.09 $0.32 $(0.10)
Weighted average common shares outstanding - basic20,522,216 20,751,673 20,968,271 20,992,062 
Weighted average common shares outstanding - diluted20,522,216 39,978,382 35,336,064 20,992,062 


    Summarized quarterly results of operations for the year ended December 31, 2019 were as follows:
($ in thousands, except per share data)First QuarterSecond QuarterThird QuarterFourth Quarter
Revenue$189,781 $327,961 $422,022 $519,999 
Gross profit5,744 31,422 52,870 66,981 
(Loss) Income from operations(22,010)5,544 21,557 31,740 
Net (loss) income(23,639)6,208 12,609 11,053 
Less: Convertible preferred share dividends(525)(918)(759)(673)
Less: Contingent consideration fair value adjustment— (18,835)(4,247)— 
Net income (loss) available to common stockholders$(24,164)$(13,545)$7,603 $10,380 
Net income per common share - basic$(1.09)$(0.61)$0.37 $0.51 
Net income per common share - diluted(1.09)(0.61)0.24 0.31 
Weighted average common shares outstanding - basic22,188,757 22,252,489 20,446,811 20,446,811 
Weighted average common shares outstanding - diluted22,188,757 22,252,489 35,419,432 35,711,512 

Certain transactions affecting comparisons of the Company's quarterly results, which may not represent the amounts recognized for the full year for such transactions, include the following:

Beginning in the third quarter of 2019, there is an adjustment to shares outstanding for removal of 1.8 million unvested shares. The number of outstanding shares of Common Stock for voting purposes remains at 22.3 million shares, as the
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aforementioned 1.8 million shares are entitled to vote those shares during the vesting period. See Note 10. Earnings (Loss) Per Share in the notes to the audited consolidated financial statements included in Item 8.

Typically, our revenue in our Renewables segment is lowest in the first quarter of the year because cold, snowy or wet conditions experienced in the northern climates are not conducive to efficient or safe construction practices. Revenue in the second quarter is typically higher than in the first quarter, as some projects begin, but continued cold and wet weather and effects from thawing ground conditions can often impact second quarter productivity. The third and fourth quarters are typically the most productive quarters of the year as a greater number of projects are underway and weather is normally more accommodating to construction projects. In the fourth quarter, many projects tend to be completed by customers seeking to spend their capital budgets before the end of the year, which generally has a positive impact on our revenue. Nevertheless, the holiday season and inclement weather can cause delays, which can reduce revenue and increase costs on affected projects. Any quarter may be positively or negatively affected by adverse or unusual weather patterns, including from excessive rainfall, warm winter weather or natural catastrophes such as hurricanes or other severe weather, making it difficult to predict quarterly revenue and margin variations. The Company started construction on 2020 renewable projects in late 2019 due to the desire of our customers to finish these projects before September 30, 2020. This shift in demand impacted 2020 quarterly revenues, which shifted revenue from the fourth quarter into the second and third quarter of 2020.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Credit Risk

    We are subject to concentrations of credit risk related to our net receivable position with customers, which includes amounts related to billed and unbilled accounts receivable and costs and estimated earnings in excess of billings on uncompleted contracts net of advanced billings with the same customer. We grant credit under normal payment terms, generally without collateral, and as a result, we are subject to potential credit risk related to our customers’ ability to pay for services provided. This risk may be heightened if there is depressed economic and financial market conditions. However, we believe the concentration of credit risk related to billed and unbilled receivables and costs and estimated earnings in excess of billings on uncompleted contracts is limited because of the high creditworthiness and diversity of our customers.

Interest Rate Risk

    Borrowings under our new credit facility are at variable rates of interest and expose us to interest rate risk. As of December 31, 2019, we had not entered into any derivative financial instruments to manage this interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness will increase even though the amount borrowed remains the same, and our net income and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease. Our outstanding principal on debt as of December 31, 2020 was $178.9 million. A one hundred basis point change in the LIBOR rate would increase or decrease interest expense by $1.8 million.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements
Page

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Infrastructure and Energy Alternatives, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Infrastructure and Energy Alternatives, Inc. (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows, for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principles

As discussed in Note 1 to the financial statements, the Company changed its method of accounting for revenue recognition in fiscal year 2019, due to the adoption of Accounting Standards Update No. 2014-9, Revenue from Contracts with Customers (Topic 606), under the modified retrospective method. Additionally, the Company changed its method of accounting for leases in fiscal year 2019, due to the adoption of Accounting Standards Update No. 2016-02, Leases (Topic 842), under the modified retrospective method.

Basis for Opinions

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the US federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue Recognition for Unapproved Change Orders—Refer to Note 1 to the financial statements

Critical Audit Matter Description

Revenue from construction contracts is recognized over time using the cost-to-cost measure of progress. 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.

Transaction pricing for the Company’s contracts may include variable consideration, including items such as change orders. 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
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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 estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based on past practices with the customer, specific discussions, correspondence or preliminary negotiations with the customer, legal evaluations, and all other relevant information that is reasonably available.

To the extent unapproved change orders are not resolved in the Company’s favor, there could be reductions in, or reversals of, previously recognized revenue. As of December 31, 2020, the Company included approximately $52.6 million of unapproved change orders in the transaction price for certain contracts that were in the process of being resolved in the normal course of business, including through negotiation, arbitration, and other proceedings.

We identified revenue recognized related to unapproved change orders as a critical audit matter because of the judgments necessary for management to determine the variable consideration related to unapproved change orders and the extent of audit effort and degree of auditor judgment when performing procedures to audit management’s estimates of revenue related to unapproved change orders.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to management’s estimates of variable consideration related to unapproved change orders used in the transaction price to recognize revenue on construction contracts included the following, among others:

We tested the effectiveness of controls over the Company’s unapproved change orders and estimates of variable consideration.

We tested the mathematical accuracy of management’s calculation of revenue recognized from unapproved change orders.

We compared historical estimates of variable consideration to actual results to evaluate management’s estimates.

For a selection of contracts identified with significant unapproved change orders, we performed the following:

Evaluated the Company’s variable consideration against the contract provisions.

Evaluated details of the underlying costs included in the unapproved change orders.

Obtained available correspondence with customers.

Performed inquiries with project managers and executive management, including those independent of accounting.

Obtained a legal evaluation of the contractual provisions from internal counsel.

Goodwill for CCS Reporting Unit—Refer to Notes 1 and 5 to the financial statements

Critical Audit Matter Description

Goodwill represents the excess purchase price paid over the fair value of acquired intangible and tangible assets. Goodwill is assessed annually for impairment on October 1st and tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. The goodwill recorded in the Specialty Civil segment is a result of two business acquisitions in 2018. The Company estimated the fair value of the Consolidated Construction Solutions I LLC (CCS) reporting unit using a combination of income and market approaches weighted equally. It was determined that goodwill was not impaired as of the measurement date for 2020, since the estimated value fair value of the reporting unit exceeded its net book value by 18.3 percent.

Assumptions that factor into the valuation of goodwill for the CCS reporting unit are projected future cash flows, estimated using projected revenues and profitability of the reporting unit, selected long-term growth rates, as well as the discount rate. The determination and extent of audit procedures related to these assumptions required a high degree of auditor judgment and an increased extent of effort, including the need to involve fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the assumptions used by management within the discounted cash flow model for CCS included the following, among others:
We evaluated management’s ability to accurately forecast projected revenues and profitability by comparing actual results to management’s historical forecasts.

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We evaluated the reasonableness of management’s estimates of projected revenues and profitability by comparing the projections to:

Historical revenues and profitability.
Backlog information for awarded projects.
Publicly available information about the industry.
Evidence obtained in other areas of the audit.

With the assistance of fair value specialists, we evaluated the reasonableness of the Company’s calculation of fair value by:

Assessing the appropriateness of the valuation methodology used to determine the company-specific risk premiums in calculating the discount rate.

Testing the source information underlying the determination of the discount rate and the mathematical accuracy of the calculation.

Evaluating the reasonableness of the long-term growth rates through comparison to industry reports and peer companies.



/s/ Deloitte & Touche LLP


Indianapolis, Indiana
March 8, 2021

We have served as the Company’s auditor since 2018.





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INFRASTRUCTURE AND ENERGY ALTERNATIVES, INC.
Consolidated Balance Sheets
($ in thousands, except per share data)

December 31,
20202019
Assets
Current assets:
Cash and cash equivalents$164,041 $147,259 
Accounts receivable, net163,793 203,645 
Contract assets145,183 179,303 
Prepaid expenses and other current assets19,352 16,855 
Total current assets492,369 547,062 
Property, plant and equipment, net130,746 140,488 
Operating lease asset36,461 43,431 
Intangible assets, net25,434 37,272 
Goodwill37,373 37,373 
Company-owned life insurance4,250 4,752 
Deferred income taxes2,069 12,992 
Other assets438 1,551 
Total assets$729,140 $824,921 
Liabilities, Preferred Stock and Stockholders' Deficit
Current liabilities:
Accounts payable$104,960 $177,783 
Accrued liabilities129,594 158,103 
Contract liabilities118,235 115,634 
Current portion of finance lease obligations25,423 23,183 
Current portion of operating lease obligations8,835 9,628 
Current portion of long-term debt2,506 1,946 
Total current liabilities389,553 486,277 
Finance lease obligations, less current portion32,146